2023 Overview on Crypto Taxation in Portugal
After years of uncertainty regarding the taxation of Crypto in Portugal, Portuguese Parliament approved a specific tax regime to come into force on January 1st, 2023, which nevertheless will need some knowledge on the varieties of Crypto in market.
In general, the related income will qualify as capital income (Category E of the Portuguese Personal Income Tax Code – “PIT Code”), capital gains income (Category G under the PIT Code) or self-employment income (Category B under the PIT Code), as follows:
• Category E – Remuneration received in fiat money from passive investments in crypto, which do not imply any crypto transfer, will be taxed at a flat tax rate of 28%.
This is a default rule to be applied when the income does not fall under another Category.
However, crypto can still be received as remuneration itself (not fiat money) when it qualifies as salary (Category A under the PIT Code) or self-employment income (Category B under the PIT Code), over even as another category of income that could be paid in kind, being taxed accordingly.
• Category G – Sales of crypto owned for less than 365 days will be taxed at a flat tax rate of 28% on the capital gain when made for fiat money, or at progressive tax rates between 14,5% and 53% if the income is received by a Portuguese tax resident who choose to aggregate it.
However, “investment/security tokens” will be equated to securities and taxed as such, not falling under the 365 days rule. Also, the 365 days rule will not apply when the capital gains are earned by a taxable person or paid by an entity residing outside the European Economic Area (“EEA”), or in another State or jurisdiction, with which isn’t in force a Double Tax Agreement (“DTA”) or another multilateral or bilateral agreement that prescribes the exchange of information for tax purposes.
• Category B – Operations related to the issuance of crypto assets, including mining, or the validation of crypto transactions through consensus mechanisms, also for fiat money, will be taxed at progressive tax rates between 14,5% and 53%.
A 5% fixed presumption of expenses will be applied to income derived from mining operations, 85% on its sale, e.g., if the taxable person receives €1.000 of income, it will only be taxed on €950 in the former scenario, or €150 in the latter, although the cessation of activity as a self-employed worker is equated to the sale of Crypto.
Common Rules
When crypto for crypto exchanges occur, e.g., under Category G or B, the taxation will be deferred to the moment it is sold, and when determining its acquisition value a “first-in, first-out” rule will apply (“FIFO”), meaning the crypto sold will be the one held for longer. Capital losses can keep offsetting the gains, except if incurred in Tax Havens.
Also, when stop being a tax resident in Portugal an “Exit Tax” of 28% will be imposed on the taxable person on all crypto assets, in the same conditions as if there as been a sale: under Category G, imposed on the difference between its market value and its acquisition value determined through FIFO.
The donation of crypto will be taxed at 10% in Stamp Duty, or at 4% regarding the fees charged by or with the intermediation of crypto by service providers, both on the value and when the operations are deemed to be located in Portuguese territory, being exempt the former between spouses, life-partners, ascenders and descendants, or all donations below €500.
At last, NFTs (“Non-Fungible Tokens”) are excluded from taxation, but only those which are truly non-fungible, meaning one of a kind, something that may give rise to some qualification dissensus, because as explained, the taxation regime will vary from NFTs to investment/security tokens, and from those and utility tokens and/or commodity/currency/payment tokens.
Nevertheless, the new regime does not exclude the applicability of any DTA that may be applied to the case, but because rarely capital gains from movable (personal) property arising abroad can be taxed at the source when received by a tax resident in Portugal, that will mean their exemption from taxation in Portugal under the non-habitual resident (“NHR”) regime unlikely.
One of the most important aspects to consider on the new regime is the fact that a correct qualification of the type of asset and income will be decisive to determine its taxation.
The eventual applicability of several DTAs signed by Portugal, including with some black-listed jurisdictions, will also be relevant, considering the new regime does not change the applicability of the NHR regime neither “Programa Regressar”, which under certain circumstances may keep benefiting eligible individuals on the incomes they receive from/in Crypto.
Is to welcome the legal certainty carried by the new regime, even with all its nuances, but is still always advisable to seek proper tax advice when receiving Crypto worldwide and residing in Portugal, as well when being a non-tax resident who receives Crypto deemed as sourced from Portugal.
Contact us