New crypto income tax in Portugal?

Portugal has announced that the government is considering imposing a tax on crypto income. 

Portugal: new taxation on crypto income?

Portugal, until now considered one of the European countries most open to the cryptocurrency market, seems ready to change course, placing a tax on income resulting from the trading of digital assets. 

This is very big news considering that until now cryptocurrencies, considered as a form of payment and not as a form of investment, were not subject to taxation in Portugal.

According to Portuguese Finance Minister Fernando Medina, the situation could soon change radically for those who invest or own digital assets in the country.

In recent days, at a hearing in Parliament, while the state budget law was being discussed, he explained:

“Several countries are building their models regarding this matter and we are going to build ours. I do not want to commit myself to a date at this moment, but we will adapt our legislation and our taxation”.

It is difficult to know when and how this new tax on income from digital asset transactions will be implemented. 

The current tax plan in Portugal 

The standard capital gains tax in Portugal for residents is 28% and personal income tax varies from 14.5% to 48%. 

But this decision certainly did not come about in the last few hours, as the country’s socialist government had already hinted last year that it wanted to change this situation that made Portugal a tax haven for cryptocurrencies. 

The Ministry of Finance has now decided to study the taxation systems in other countries, commenting:

“In order to propose an adequate tax framework for these new instruments, taking into account the necessary balance between the fair distribution of income and wealth and the attraction of foreign investment”.

Something similar is happening in the US

This decision follows a few months after Biden issued an executive order asking the country’s authorities to study a new regulatory framework for cryptocurrencies. 

In the United States, a new tax regime was also recently approved that would affect cryptocurrency gains even if not yet realized, which triggered protests from the entire crypto asset world.

Returning to Portugal and the new taxation that could be introduced next year, the Secretary of State for Fiscal Affairs Mendonça Mendes, also announced that the government will not only tax gains in cryptocurrencies, but these will probably be included in other types of taxation, such as VAT and stamp duty (known as Imposto de Selo). 

In short, a real 360-degree change from the ultra-favourable taxation applied so far.

The more left-wing parties are for a much harsher taxation on cryptocurrencies, as Mariana Mortágua of the Left Bloc Party (BE) argues, telling the media: 

“It is unbelievable how the PS refuses to tax fortunes created within seconds on the internet while maintaining the VAT on electricity and not increasing the minimum wage in the context of inflation”.

The Finance Minister responded to these demands by inviting a calm approach:

“We are evaluating by comparing internationally what is the definition of crypto assets, which includes cryptocurrencies. We are evaluating the regulations in this area, be it in the fight against money laundering and the regulation of markets, to present a legislative initiative that truly serves a country in all aspects, not a legislative initiative that makes the front cover of a paper”.