In recent years, Portugal has become a safe haven for cryptocurrency investors. With many moving there during the pandemic as cryptocurrencies soared up and down. But now the rug is being pulled from under them. The Portuguese government has proposed a new cryptocurrency tax policy as part of its 2023 national budget. Contained in the 450-page document covering all things tax is a 28% capital gains tax on cryptocurrency gains. This 28% capital gains tax is standard in Portugal, which means it is no longer a haven for crypto fans. There is also a 4% tax on free cryptocurrency transfers, as well as additional taxes in certain cases. It is important to point out, however, that earnings through sales of cryptocurrencies held for more than a year will still be exempt from this tax. This means that the proposed capital gains tax is more of a business tax, in fact.
Portugal had already suggested this
This move is not a surprise. Finance Minister Fernando Medina announced in May that the move to bring cryptocurrency into the capital gains network would come sooner rather than later. The decision comes on the back of the move to reclassify cryptocurrency as an investment rather than cash, meaning it will now be caught in capital gains tax.
Lisbon and Madeira
Lisbon, the capital of Portugal, is seen as one of the European cryptographic hubs, in part due to (previously?) lax cryptographic laws. Portugal also offers an easier route than many nations to residency, attracting even more cryptocurrency investors. It will be interesting to see how this affects things going forward. The race between jurisdictions to establish themselves as European cryptocurrency hotspots has been a competitive one. Madeira, the Portuguese island where football superstar Cristiano Ronaldo hails from, sent a signal of intent at the latest Bitcoin conference in Miami, announcing Bitcoin as legal tender. Lugano, a small town in Switzerland, is the only other place in Europe where Bitcoin is actually legal tender. In addition to Bitcoin, the Tether stablecoin is also de facto legal tender, while a Lugano-specific stablecoin is also in the works.
final thoughts
As the bear market roars and investors everywhere are suffering, it’s worth remembering that you have to secure earnings to be captured by the capital gains tax. The move to levy capital gains tax is unlikely to hurt in the short term, therefore. Remember, any gains from more than a year ago are immune. And given that Bitcoin traded at $69,000 eleven months ago, it is likely unlikely that there will be many traders worried about that 28% tax anytime soon. However, it will be interesting to see if cryptocurrency enthusiasts begin to settle elsewhere, as Lugano and elsewhere continue to scramble to attract their digital cash.