Portugal has new tax rules for crypto assets that went into effect on January 1, 2023. These rules apply to individuals who are tax residents in Portugal. The key points of the new tax rules include:
- Unique and non-fungible crypto assets are not considered crypto assets for tax purposes.
- Only 15% of crypto-related income is taxed, except mining activities, which are taxed at 95%.
- There will be no tax on capital gains from the sale of crypto assets held for 365 days or more, regardless of when they were acquired.
- No tax will be applied when receiving crypto assets in exchange for selling other crypto assets.
- Leaving Portugal and becoming a non-tax resident will be considered a disposal event for capital gains tax purposes.
What is considered a crypto asset for tax purposes?
a) Income derived from professional, business or commercial activities (category B income for personal income tax purposes)
For tax purposes, a crypto asset is any digital representation of value or rights. It can be transferred or stored electronically using distributed ledger technology or similar systems. However, the definition excludes “unique and non-fungible crypto assets.”
How is income from crypto-related activities taxed?
a) Income derived from professional, business or commercial activities (category B income for personal income tax purposes)
- Income from professional, business, or commercial activities related to crypto assets, including mining and transaction validation, falls under Category B income. Trading activities are also classified as Category B for personal income tax purposes. It will be taxed at a rate of 15%, except for mining activities, which will be taxed at a rate of 95%. Income is considered earned at the moment of the onerous disposal of the crypto assets, unless other crypto assets are received as compensation.
- An onerous disposal occurs when business activity ends or the individual stops being a tax resident in Portugal.
It is also worth noting that this tax rule applies only for individuals, crypto assets held by legal entities are subject to different tax rules.
b) Income from capital (category E income for personal income tax purposes)
- All forms of remuneration derived from crypto-related activities are considered income from capital (Category E income for personal income tax purposes) and will be taxed accordingly. Income from capital is generally taxed at 28%. If the remuneration is in crypto assets (crypto for crypto exchanges), they won’t be taxed upon receipt. Instead, they will be subject to capital gains tax when sold in the future.
- Gains from the onerous disposal of crypto assets that do not qualify as Category B or Category E income will be considered a capital gain for tax purposes. The capital gain corresponds to the positive difference between the disposal value and the acquisition value.
- If crypto assets were held for 365 days or more, capital gains and losses are excluded from the annual taxable calculation. This means there will be no tax on gains from selling crypto assets held for over 365 days.
- If crypto assets are received as compensation for the onerous disposal of crypto assets held for less than 365 days, no tax will apply at that moment. However, the crypto assets received will be considered to have the same acquisition value as the crypto assets being sold.
Portugal new tax rules on crypto assets
It’s important to note that the capital gains exemption for crypto assets held over 365 days has limitations. This exemption does not apply to individuals or entities who are not tax residents in another EU or EEA member state. It also does not apply to those in states without a double taxation treaty or agreement for tax information exchange.
In summary, the new tax rules in Portugal provide a clear framework for the taxation of income and capital gains related to crypto assets for individuals who are tax residents in Portugal.
The key points include a simplified tax regime for crypto-related professional or business activities. There are also exemptions on capital gains for assets held over 365 days and no tax on crypto-to-crypto exchanges.
However, it’s important to note that these rules may change and it’s always recommended to consult with a tax advisor or professional. In this way, you can ensure compliance with the new tax rules.
How does the new regime integrate with the non-habitual resident regime?
The new tax rules for crypto assets in Portugal do not affect the application of the Non-Habitual Resident (NHR) regime. Income and gains from crypto assets will be treated the same as other income types under the NHR regime. They are classified as category A, B, E, or G for personal income tax purposes. Income from crypto assets or activities by non-habitual residents in Portugal follows the same tax rules as the NHR regime.
Want to learn more about the NHR in Portugal? Click here to read more. Or click here to read more about the Golden Visa.
