Portugal’s finance minister has announced that cryptocurrency enthusiasts must take into account a capital gains tax of 28%. It is not yet known when this new tax will take effect.
When is the party over?
For a long time, the crypto-community saw Portugal as the promised land because the government was lenient with cryptocurrency. Many have therefore moved with their cryptos to the hot spots of the southern European country.
Finance Minister Fernando Medina announced at a meeting of the Portuguese parliament that cryptocurrencies in the country will soon be subject to capital gains tax, according to the Portuguese news media ECO. This is confirmed by António Mendonça Mendes, Minister of Foreign Affairs for Taxation.
What is capital gains tax?
Capital gains tax (in English known as capital gains tax) is a tax on the gain on the sale of cryptocurrency. Do you buy bitcoin for 100 euros, but do you sell it for 1100 euros? Then you have 1000 euros profit, of this profit you have to pay 28% tax. In other words, every time a Portuguese exchanges crypto for fiat money, he or she gives up more than a quarter.
We do not have this tax in the Netherlands. Here we pay wealth tax on our properties, including cryptocurrency. If your assets are below EUR 50,560 on 1 January, you do not have to pay tax on this.
For a long time, Portugal did not see cryptocurrency as a wealth or as an investment, but simply as another form of money. Therefore, crypto has been exempt from capital gains tax since 2018. Apparently, the country has changed its mind so that they see crypto as an asset, allowing them to charge a 28% profit tax on it.
Portugal seemed for a long time like the Promised Land
Due to the fact that crypto was not taxed effectively, Portugal gained a reputation as one of the most attractive crypto-tax havens in the world. It helps that Portugal is a country with good weather, beautiful cities, good food, wonderful beaches and a (somewhat) stable currency and government.
This has also caused a lot of cryptocurrencies, exchanges and events to move to the country. Portuguese politicians stress that the introduction of 28% capital gains tax should not be seen as a deterrent to companies.
Instead, Portuguese politicians have claimed that they have always intended to regulate crypto, and have looked closely at how other countries have adapted their rules. Portugal has been able to take decisions on this basis.
“It is an area where there is a lot more knowledge and a lot more progress so that Portugal can drink from international experience,” Medina told parliament.
More taxes on the way?
Portugal may be considering other crypto-related taxes for a much longer period of time. António Mendonça Mendes, foreign minister for tax affairs, said at the same meeting that “cryptocurrencies are a much more complex reality than taxes alone when it comes to capital gains.” He further suggested that crypto in Portugal could soon be subject to VAT (type of VAT), fees or even property taxes.
“We are assessing the best regulation in this case so that we can not present a legislative initiative that should appear on the front page of a newspaper, but a legislative initiative that really serves the country in all its dimensions.”
It is that our kitchen is not so special, the weather is more often gray than blue, and living is unaffordable, but otherwise all lovers of as little tax-on-crypto as possible can just as well come to Holland.
Not so black and white
It is still unknown whether the new tax will really be such a deterrent for companies. Jorge, a metavers builder in Lisbon, says it could take years before this becomes law in Portugal.
In addition, Jorge expects that if the legislation enters into force, all these companies and people with crypto will move to Madeira, a Portuguese island. Here, the tax rules for crypto remain favorable and bitcoin will soon become legal tender.