Portugal Proposes 28% Tax on Cryptocurrency Capital Gains

New Tax Proposal for Cryptocurrencies in Portugal

Long considered a cryptocurrency tax haven, Portugal’s government has proposed a 28% tax on capital gains from cryptocurrencies held for less than a year. This significant policy change comes as part of the 2023 State Budget document released on October 10, which outlines a dedicated framework for the taxation of digital assets.

Taxation Details

The proposed tax framework aims to make capital gains relating to crypto-assets held for under one year subject to a capital gains tax of 28%. However, any capital gains from crypto assets held for more than 365 days would be exempt from taxation. Additionally, a 4% taxation fee is proposed for free transfers of cryptocurrencies, particularly in cases of inheritance, along with potential stamp duties on commissions charged by cryptocurrency intermediaries.

A Move Towards Legal Recognition

Historically, the Portuguese tax authorities have not recognized cryptocurrencies as legal tender, which allowed the market to thrive without taxation. The recent proposal signifies a shift towards establishing a ‘broad and adequate’ tax framework that aims to better regulate and classify cryptocurrencies.

Parliament’s Role and Historical Context

This proposal is set to go before the Portuguese parliament, which will have the authority to approve or reject the changes. The rationale for this move has been discussed in previous sessions, with Secretary of State for Tax Affairs António Mendonça Mendes emphasizing the need to tax cryptocurrencies as users realize capital gains.

Comparison with Other Countries’ Regulations

Germany has adopted similar measures, releasing new guidelines in May 2022 which stipulate that individuals who sell Bitcoin (BTC) or Ether (ETH) more than one year after acquisition will not incur any taxes on profits. This indicates a growing trend across European nations to regulate cryptocurrency taxation in light of the economic realities surrounding them.

Conclusion: The Impact of Proposed Regulations

If implemented, this framework could enhance security and legal clarity while fostering the crypto economy in Portugal. However, it also raises potential concerns for local cryptocurrency investors who have enjoyed a tax-exempt environment until now, indicating a significant transformation in Portugal’s stance on cryptocurrencies.