In the recent waves of stricter cryptocurrency regulation globally, Portugal introduced plans to begin taxing cryptocurrency transactions. This will allow the Portuguese government to fix the legal restriction that has prevented it from taxing virtual assets.
On Friday, Portuguese finance minister Fernando Medina revealed in a news conference that the government intends to introduce laws on the subject. Prior to this moment, the country remained one of the countries in Europe where digital assets like cryptocurrencies were not taxed. The finance minister was quoted as saying, “We will not maintain this vacuum.”
New Taxation Laws
The Portuguese minister stated that the government intended to enact a new law “as soon as feasible,” but he did not provide a specific date. He said that the plan that the government will choose will be fair and make sure that Portugal stays a competitive tourist destination.
According to a law that went into effect in 2016 following a tax administration judgement, cryptocurrencies are not considered foreign currency or financial assets in Portugal. Because of this, the country does not tax income from trading cryptocurrencies. This makes it a crypto paradise.
The government does not impose a VAT or capital gain tax on the use of crypto assets. The only way these categories of users pay tax is if economic activities are paid for using digital assets.
Consequently, Bitcoin investments have grown increasingly popular, particularly in the real estate industry. In the month of May, the country recorded its first real estate sales that were fully paid for using Bitcoin. This unique real estate sale was facilitated by Zome, a popular real estate brokerage in Portugal. The three-bedroom property located in Braga was sold for a total of three bitcoins without conversion to euros.
Susana Duarte, an associate partner at the Lisbon legal firm Abreu Advogados, told Coindesk that the new policy would likely include a capital gains tax. The Portuguese government has not particularly stated an amount that will be levied on the digital asset. However, the current law charges up to 28% tax on capital gains.
It is also unclear how the new regulations will impact yields or staking farming. The minister has stated that a clearer picture of the government’s approach will be circulated soon.