Bitcoin and crypto trading in Portugal
Portugal’s laid-back attitude towards the taxation of crypto gains and its positive policy towards attracting high net worth individuals has long marked the country as a crypto-friendly favorite amongst overseas investors – or Non-Habitual Residents (NHRs).
For indigenous non-professional crypto holders or ‘casual investors’, there is no tax on gains made and regulation is light touch. VAT mostly doesn’t apply As we have seen in several countries, however, firm regulation and more protection for consumers makes for a more attractive crypto environment – and attracts more corporate players. That said, Portugal is also very keen on facilitating the take-up of blockchain enterprises as expressed within its Digital Transformation Action Plan some few years back. Within the scope of the plan was it is hoped to provide a productive environment for innovation and ‘digital transformation’ of businesses, including the exploitation of blockchain potential via hubs and shared technologies – something that, admittedly, is being promoted in so many countries.
Portugal’s tax-friendly environment, especially for rich expats, makes it something of a haven for crypto investing. Investors can easily crypto on any number of leading platforms and enjoy the sunshine and fine ports too! Despite price falls in Bitcoin and the lack of a more cohesive crypto strategy aside from its low to zero taxation policy, the country still retains an exceptionally high volume of crypto trading online and moves Portugal up a place in the Coincub Q1 2022 ranking.
Using crypto in Portugal
Portugal has a rapidly expanding digital currency culture and there are at least 4 ATMs dotted around the country with two located in Lisbon. Spending cryptocurrency is growing fast in a number of bars, restaurants and retailers. In addition, many popular world brands accept Bitcoin including Wikipedia, Microsoft, AT&T, and Gyft among others.
In line with its positive stance on crypto, Portugal has no tax on inheritance, wealth, or gifts for residents.
Law and crypto trading in Portugal
As with many European countries, crypto has leveled the playing field for smaller countries. The global crypto economy has created new financial hubs and leading economies.Portugal officially recognises digital currencies and, within EU legislation, has some autonomy to write favorable crypto legislation. Portugal is one of the most crypto-friendly countries anywhere – perhaps one reason why so many people, especially rich ones, retire there.
Crypto trading is legal and advanced in Portugal, making it one of the most crypto-friendly countries. All leading exchanges operate in the country. Portugal recently approved two home-based cryptocurrency exchanges with the central bank, the Banco de Portugal; licensing Mind the Coin and Criptoloja.
Taxing cryptocurrencies in Portugal
Holding crypto and not selling, even if it goes up in value, is not taxable. Any gains made from the
purchase or sale of bitcoin are not taxed. To say this is rare is something of an understatement. Should an individual’s gains from crypto form a major part of their income, then the activity could be subject to tax. There are similar examples of this around the world.
Payments in bitcoin to individuals in Portugal are also not taxed. Companies who deal in bitcoin will be liable to tax on capital gains of between 28% and 35%. Keeping track of your dealings is vital, as much depends on classification and definitions. As always, some things are best sorted out with a trained accountant.
Much depends on whether you are trading professionally or a casual investor. Crypto trading is both recognized and tax allowable. For expats or financial immigrants to Portugal who declare a tax residency in the country, there is a highly attractive tax regime called NHR (Non Habitual Resident), offering tax reductions and exceptions.
If you are a long-term resident of Portugal you are deemed a permanent resident for tax purposes. Should you move and become resident elsewhere, your tax affairs will come under the jurisdiction of your resident country. Thanks to Portugal’s generous tax breaks for wealthy immigrants, more people are coming into the country rather than leaving it.
Mining crypto is beyond the scope of most individuals and calls for significant investment in time, money and equipment. However, Portugal’s income tax laws treat mining in the same way as trading – in which case, as a business or professional activity it is likely to be taxed.
Crypto financial services in Portugal
Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to become part of long-term retirement schemes. As Portugal is something of a generous haven for high net worth individuals, those who can pay are more likely to be offered some form of cryptocurrency as an option in retirement planning.
Banks have an encouraging openness towards bitcoin but are still very much on their guard against fraud and money laundering. Some have previously restricted crypto transactions but later re-instigated them. Online services such as Revolut are able to buy, sell and exchange crypto – as with all things crypto, the situation is changing all the time.
Decentralized finance is behind the rapid interest and growth of cryptocurrency and is underpinned by blockchain technology. Although no DeFi projects have been completed or trialed fully, the Portuguese authorities are interested in such developments and are looking keenly at what is happening in this field. As a member of the EC, major initiatives on DeFi are most likely to come from EU-wide regulatory initiatives
Crypto regulation in Portugal
In Portugal, the central bank requires the registering of bodies that wish to act as virtual asset service providers (VASPs). The bank requires that they comply with legal and regulatory provisions on the prevention of money laundering and terrorist financing (AML/CFT). Improved security for your crypto assets inevitably means increased legislation and regulation. However, security is largely a question of doing your homework. If you lose your keys or get hacked, your most likely form of compensation is through any insurance that your exchange offers on your holdings. Remember that all exchanges have their own levels of security, advantages and disadvantages, so you need to find the service that satisfies your needs best.
As with many government bodies, the tax authorities can request information from crypto exchanges and expect compliance with their laws. You’ll need to provide personal details and proof of ID – so anonymous dealing is not possible. Crypto entities must be registered if they are providing exchange services. In addition, bodies providing crypto transfer services and custody of digital assets or instruments must also register with the central bank.