The Portugal crypto tax haven: why Portugal hasn’t imposed a capital gains tax investments… yet
Whilst many countries were quick to announce that they would be imposing a capital gains tax on cryptocurrency like any other asset, Portugal has been slower and that means that, for now, it is one of the few tax havens for digital assets.
The Portuguese congress, Assembleia da Republic, has rejected two bills that would have imposed a tax on cryptocurrencies this week.
Portugal is one of a handful of countries, including El Salvador and Malaysia, that currently doesn’t impose a capital gains tax on cryptocurrency. In fact, trading digital assets is not even considered investment income in Portugal.
Only time will tell how long cryptocurrency remains tax-free in Portugal as the Portuguese Minister of Finance, Fernando Medina, has recently declared that cryptocurrencies in the country will soon be subject to capital gains taxes.
The absence of capital gains tax in Portugal has made it a popular place for the crypto industry with many blockchain workers and crypto start-up companies basing themselves there to take advantage of the tax haven.
The delayed approach, it appears, is simply due to the Portuguese government attempting to gain a better understanding of crypto assets and how they would be taxed. They acknowledged the complexity of cryptocurrency with Secretary of State for Tax Affairs, António Mendonça Mendes stating they are evaluating and comparing with their international counterparts to gain a better understanding of cryptocurrency as “there is no universal definition of cryptocurrencies and crypto assets.”
“We are evaluating what regulations [fit] this matter […] so that we can present not a legislative initiative to appear on the front page of a newspaper, but a legislative initiative that truly serves the country in all its dimensions,” he said.
Should Portugal eventually start taxing crypto capital gains, locals and probably expect that it will sit at around the tax rate for financial investment, at 28 per cent.
It will be interesting to see what rate they impose on cryptocurrency, given that they are now home to a crypto industry hub.