Portugal: proposal to tax crypto rejected for now

Yesterday, Portugal’s parliament rejected a bill to tax crypto. 

For now, there will be no tax on cryptocurrencies in Portugal

This was reported by local newspaper Sapo, revealing that it was a proposal put forward by minority party Bloco de Esquerda. 

Sapo reports that the Portuguese Parliament is voting on various proposals for the new 2022 State Budget and that they are rejecting the vast majority of proposals from minority parties. The Bloco de Esquerda is commonly referred to as a left-wing populist party, and currently has only five deputies. 

The proposal therefore had no real chance of being accepted and envisaged the introduction of a tax on cryptocurrencies. 

However, the country’s government seems intent on closing the regulatory loophole that prevents virtual assets from being taxed.

This was reported by the Minister of Finance, Fernando Medina, announcing that the government plans to adopt legislation on the subject to fill this gap. The fact that Bloco’s proposal was rejected by Parliament may have no concrete impact on this government plan. 

Indeed, after a 2016 ruling, Portugal legally cannot consider cryptocurrencies as foreign currencies or financial assets, so any profits from buying and selling cryptocurrencies cannot be taxed in the country. This makes Portugal a very attractive country from a tax point of view for crypto traders, but this situation looks set to change. 

How will the proposed law develop over time?

Although it is quite likely that Portugal will eventually introduce a rule to tax any capital gains, in order not to lose this competitive advantage, the government seems intent on enacting rules that do not weigh too heavily on crypto trading profits. 

However, it is always best to wait for the final results of the legislative process to ascertain the exact details of the possible new law in order to see whether or not this promise will really be kept. 

In many EU countries, there is a so-called Capital Gains Tax (CGT), i.e. a tax on any capital gains from the purchase and sale of financial assets, and this CGT also applies to cryptocurrencies, which are often equated with foreign currencies or normal financial assets traded on the markets. Typically, the rate applied is between 20% and 30%, although EU countries tend to converge in this respect so as not to compete too much in the tax arena. 

As for Portugal, it remains an anomaly, not because of an explicit desire to be more tax competitive with crypto traders, but because of a regulatory vacuum. In light of this, it is entirely possible to imagine that this gap will be filled sooner or later.