Portugal has not yet clearly defined how to tax its residents when individuals are dealing in cryptos, particularly when there is no conversion to fiat currencies. Although you may be doing this, there is no line of sight to identify the base cost and, therefore, the ability to calculate the gain.
Even if this were to be defined, the question remains under what schedule should such a profit be reported. Until lawmakers define under legislation what is, in essence, trading or even converting to a fiat currency outside the Portuguese territory, these activities should not give rise to assessment.
However, it should be noted that where a company is trading in cryptos and the profits are itemised on the company’s balance sheets, the gains are identified and taxed as company profits.
Cryptocurrency is tax-free in Portugal
Cryptocurrencies, as with other types of currency, can generate income in several different ways:
▪ Gains from the sale and purchase of coins
▪ Profit from commissions charged in services relating to the acquisition of use of cryptocurrency
▪ Profit derived from the sale of products or services for cryptocurrency
The Portuguese tax authorities are quoted as saying that “an exchange of cryptocurrency for ‘real’ currency constitutes an on-demand, VAT-free exercise of services.”
This means that any profit from the purchase and sale of cryptocurrency in Portugal will not be taxed, nor will the exchange of cryptocurrency for other currencies.
The authorities have also clarified that no income tax must be paid by individuals who receive payments in cryptocurrency; however, companies registered in Portugal dealing in cryptocurrency are taxed on capital gains (between 28% and 35%).
Regarding tax-free income for traditional investments, you would need to set them up so they were only income producing, i.e., dividends, which coming from a country that has a DT arrangement with Portugal should be tax-free.
Capital Gains Tax (CGT):
Gains made from the purchase and sale of cryptocurrency is not taxed, as is the same with any other currency. However, companies which offer services relating to cryptocurrencies are taxed on capital gains, between 28% and 35%.
The Non-Habitual Resident (NHR)
Tax Regime:
Investors in Portugal who have not been tax residents in the country for the previous five years can benefit from the non-habitual tax regime. Under the NHR, you may be able to monetize your personal cryptocurrency profits in Portugal, exempt from capital gains tax.
This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific course of action.
By Raoul Ruiz Martinez
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Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises clients on private financial matters in both the UK and throughout Europe under the MiFID regulation. Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000. | 289 561 333
