Business

Portugal loses crypto tax haven status as state announces tariffs

blank

Much to the chagrin of many Golden Visa seekers, Portuguese Finance Minister Fernando Medina has confirmed that his country will start taxing cryptocurrency, but has not committed to a date.

The move to start taxing crypto was backed by Secretary of State for Tax Affairs António Mendonça Mendes on May 13, according to Sapo, a local news outlet.

However, there is still no date for the start of the tax or a set rate. It is charged on investment gains from cryptocurrencies such as Bitcoin (BTC), the largest crypto by market cap. This would reverse the tax law introduced in 2016, which stated that since crypto is not legal tender, profits cannot be taxed.

Medina told a working session in Parliament that his rationale for the tax came from comparing Portugal to countries that “already have systems in place”. In addition, Sapo reported that Medina found that if an asset that creates capital gains is not taxed, it makes no sense. He said:

“There shall be no loopholes resulting in capital gains relating to the transaction of assets not subject to tax.”

It appears that Medina will not levy a stifling tax rate on crypto profits. He explained that it is important to create and implement a system that makes taxation “reasonable” but which “does not result in revenue going to zero, which is actually contrary to the goal for which it exists”.

At the parliamentary working session, Mendes said taxing cryptocurrency is more complicated than most other assets because “there is no universal definition of cryptocurrencies and crypto-assets.” He continued by saying:

“We are evaluating which regulations [fit] this thing […] so that we cannot present a legislative initiative that will appear on the front page of a newspaper, but rather a legislative initiative that really serves the country in all its dimensions.”

Until now, Portugal has been seen as a crypto tax haven, offering a permanent residency visa known as the Golden Visa as it grants holders special tax exemptions and a path to citizenship. The Golden Visa program was started to attract foreign investors. Industry watcher Anthony Sassano saw the funny side:

Related: Crypto Capital wins one of four key areas for the Australian Revenue Commissioner

In February, a Portuguese expat hailed the western Iberian nation for the rate of crypto adoption among merchants, even suggesting that bitcoin could one day become legal tender there in an interview with Cointelegraph. However, now that the tax law is set to be reversed regarding crypto, he has a lot to think about.