Portuguese Parliament Holds Off Taxing Crypto Gains for Individuals

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  • The gov­ern­ment could wait for a com­mon Euro­pean approach to the tax­a­tion of cryp­toas­sets, which could delay the future bill
  • Cor­po­ra­tions in Por­tu­gal have always had to pay tax­es on their cap­i­tal gains from cryp­to investments

Portugal’s par­lia­ment this week reject­ed two bills that would intro­duce heavy tax­es on cryp­to gains for indi­vid­u­als. The Social­ist Par­ty, which gained a major­i­ty in January’s par­lia­men­tary elec­tion, vot­ed against the two bills but is look­ing to under­take a more com­pre­hen­sive review of tax leg­is­la­tion soon. 

One of the amend­ments would com­pel tax author­i­ties to tax cap­i­tal gains from per­son­al cryp­to invest­ments beyond 5,000 euros ($5356). The oth­er would impose a flat rate tax of 28% on all cryp­to gains, which is the nor­mal cap­i­tal gains tax in Por­tu­gal for res­i­dents. The final ver­sion of the 2022 bud­get, which doesn’t include these bills, was approved this Fri­day in the Por­tuguese parliament.

“The two pro­pos­als reject­ed in Par­lia­ment this week were over­ly sim­plis­tic and would have cre­at­ed prob­lems” for indi­vid­u­als and tax author­i­ties, says Hugo Volz Oliveira, sec­re­tary-gen­er­al of the New Econ­o­my Insti­tute, a Por­tuguese non­prof­it found­ed by lead­ing Web3 com­pa­nies and backed by the Near blockchain, the web brows­er Brave and sev­er­al Por­tuguese universities.

Under cur­rent Por­tuguese tax law, cap­i­tal gains from cryp­to invest­ments are seen as a form of pay­ment — a cur­ren­cy, but not an asset — and are not taxed so long as they do not serve as an individual’s main source of income. This is a result of a lack of leg­is­la­tion rather than an active pol­i­cy by Por­tuguese lawmakers.

Cor­po­ra­tions in Por­tu­gal have always had to pay tax­es on their cap­i­tal gains from cryp­to invest­ments, and that will not change under the new tax regime.

Volz Oliveira believes the rul­ing par­ty will announce a new pro­pos­al around Octo­ber, when Par­lia­ment begins dis­cussing the bud­get for 2023, but recent com­ments from Por­tuguese Finance Min­is­ter Fer­nan­do Med­i­na imply pol­i­cy­mak­ers will wait for a Euro­pean con­sen­sus on the matter. 

“This means a holis­tic approach to the tax regime could be on the cards, which would imply tax­a­tion could only be part of the bud­get for 2024,” Med­i­na said. 

Ear­li­er this month Med­i­na con­firmed that his gov­ern­ment was study­ing cryp­to gains tax­a­tion. The min­is­ter did not pro­vide a time­frame for when this will hap­pen, he said in Par­lia­ment on May 13 in a hear­ing about the country’s 2022 bud­get, which was delayed after a polit­i­cal cri­sis in late 2021 and an ear­ly elec­tion in January.

“Sev­er­al coun­tries are build­ing their mod­els con­cern­ing [tax­ing cryp­to] and we are going to build our own. Right now, I don’t want to make a com­mit­ment regard­ing a date,” Med­i­na said. He argued that there shouldn’t be any loop­holes that spare cryp­to investors from pay­ing tax­es, but he also cau­tioned that high lev­els of tax­a­tion could “bring rev­enue down to zero.”

The reform being stud­ied by the gov­ern­ment will include oth­er aspects of tax leg­is­la­tion beyond cap­i­tal gains, such as val­ue-added tax, or VAT. It will also cov­er anti-mon­ey laun­der­ing leg­is­la­tion, as well as reg­u­la­tion and super­vi­sion of cryp­to mar­kets in Portugal.

Por­tuguese tax author­i­ties last week deliv­ered to the gov­ern­ment a study about how oth­er coun­tries are deal­ing with cap­i­tal gains from cryp­toas­sets, Volz Oliveira said. “The cas­es of Bel­gium, Lux­em­bourg and Ger­many, which exempt cap­i­tal gains from cryp­toas­sets held for a cer­tain peri­od with­out any trad­ing involved are inter­est­ing,” he said. 

The finance minister’s answers to mem­bers of Par­lia­ment sug­gest that Por­tu­gal is wait­ing on the final out­come at the Euro­pean lev­el of MiCA — the Mar­kets in Cryp­to Assets reg­u­la­tion — as well as the Trans­fer of Funds Reg­u­la­tions (TRF) leg­is­la­tion, to go ahead with a broad leg­isla­tive reform regard­ing cryptoassets.


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  • Tia­go Varzim

    Block­works

    Free­lance Reporter

    Tia­go Varz­im is a jour­nal­ist based in Por­tu­gal cov­er­ing macro­eco­nom­ics, finan­cial mar­kets and dig­i­tal assets in the Euro­pean Union. He works for key finan­cial news­pa­pers in Por­tu­gal. Tia­go grad­u­at­ed from Esco­la Supe­ri­or de Comu­ni­cação Social in Lis­bon with a degree in journalism.

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