There is no date, nor plan of attack, but the government of Portugal has already started the path – complicated in any case – to legislate the cryptocurrency sector in the country. So far with one of the most lax regulations regarding these digital assets and claiming a large number of fortunes who have decided to settle in the Portuguese country.
Portugal was the last of the European strongholds to strongly resist any legislation that might limit – or control – the country’s crypto activity. But the Portuguese Finance Minister, Fernando Medina, has already dropped the trial balloon. “I don’t want to commit to a deadline. The timetable will be as soon as possible, when we have a coherent proposal and after a wide public debate,” he told the media a few days ago. “The intention of the government is to legislate on this issue,” he added.
No More Tax haven for Cryptocurrencies in Portugal
What path will Portugal take to legislate on these digital assets? It is on this point that the Portuguese legislator is still not clear. They emphasize that it will be fair, efficient and competitive for the country’s interests and its role vis-à-vis its international competitors. And while the way forward is not entirely clear, what is clear is that Portugal will no longer be on the – whitelist for crypto investors – tax havens. The 0% tax policy has its days numbered.
Say goodbye to zero taxation for cryptocurrency investors
The Taihattus are a well-known and very large Dutch family. Since 2017, they are based, at least fiscally, in Portugal. The reason? The family decided to invest all their capital in Bitcoins. Just when it was hovering around $900. Now, in low hour, the family’s peak for each of its digital financial assets has reached $41,000. They became crypto-millionaires and even shared their journey in a book and on social media.
Like them, and following the war in Ukraine, the Portuguese country experienced an increase in its population of Ukrainian origin. Not only because of the war conflict. These refugees are investors in digital assets and Portugal was the best place to put down roots. Again, its Bitcoin and other digital currencies friendly policy.
If we add to this the regulations in force since 2012 regarding non-habitual tax residence, which exempts foreigners from paying income from outside Portugal, the perfect storm is forming. Over the past decade, the country has increased its number of foreigners by 40% attracted by the weather and, of course, taxation.
But what does it mean that Portugal is a tax haven for cryptocurrencies? Very simple: no taxes are paid on income received with cryptocurrencies. It is, in other words, a legal vacuum considering that it is not a question of financial assets. Nor the parts. Of course, there are exceptions. Depending on who owns the digital asset, it will or will not be registered with 20%. Thus, the merchant – or the professionals – must clarify their accounts with the administration. They are the guild of holders – and of course to which everyone eventually agrees – those who have a free crypto bar. As this is not their main “activity” and they earn nothing from their transactions, at least in front of the Tax Agency, they are accountable to no one.
It is, as we have explained, a loop-hole which benefits from an absolute absence of regulation. The same who could have his days numbered.
What do the Portuguese say?
How could it be otherwise, the question is a political issue that confronts the most liberal sides and those on the left. Although both agree on the need to create a settlement, still disagree on how to deal with this settlement. As expected, some are appealing to the instability of the cryptocurrency market. That of El Salvador, which has made Bitcoin an official currency of the country, is suffering the ravages of the collapse of prices in the international digital market. Or the case of Luna and Terra or the Argentinian stablecoins. The others call on Portugal to continue to be an attractive location for this type of asset, maintaining the position it has occupied in recent years. Currently, and according to the first Portuguese political declarations, a regulation of fixed and low taxes is put forward.
In principle, Portugal aims to consider crypto-assets as assets in themselves. It only remains to see how he controls them. Spain, for its part, is recording increasing profits: 19% from 0 to 6,000 euros. 21% from 6,001 to 44,000 euros. 23% from 44,001 to 200,000 euros. 26% for amounts over 200,000 euros. The Gallic neighbor points to unitary taxation: 30% flat tax for income with crypto-currencies.
Indeed, Spain and France -despite their deference-, They have been closely monitoring Portugal’s activity for some time. The Bank of Spain itself already released a report earlier this month in which it pointed out that Portugal’s crypto operations were disproportionate to the size of its economy.
