A proposal to tax Bitcoin and other cryptocurrencies was rejected by Portugal’s parliament today. Left-wing parties Bloco de Esquerda and Livre advocated taxing digital assets during a Wednesday evening budget discussion, but the motion was rejected, according to online daily ECO’s live blog.
The suggestion requested that the government explore taxing cryptocurrency revenues over €5,000 ($5,340.45).
Nonetheless, the days of a tax-free crypto-Portugal may be numbered. The Socialist Party, which is now in power and controls a majority of the legislature, is yet to introduce any laws. Despite this, there is a chance that in the near future, Portugal will no longer exempt cryptocurrencies from taxation.
So, no longer a crypto-tax haven?
Portugal has long been regarded as a crypto-tax haven, with profits from individual cryptocurrency sales tax-free since 2018. In comparison with the current capital gains tax rate of 28% on financial investments, Portugal has an effective capital gains rate of 0% on crypto.
Furthermore, in the European country, trading digital assets is not considered investment income. As a result, crypto-companies and events flock to Lisbon, despite the fact that firms that accept cryptocurrency must pay income tax on their earnings.
That may be coming to an end, however. The Portuguese Minister of Finance, Fernando Medina, recently stated that cryptocurrencies will be subject to capital gains taxes in the near future. He also claimed that the government will work on the regulatory framework, although he did not specify when this would take place. He also claimed that there should be no “gaps” in the tax system that would result in some incomes not being taxed in the country.
“Many countries already have systems, many countries are building their models in relation to this subject and we will build our own.”
Bloco de Esquerda’s Mariana Mortágua blasted the administration for failing to find a mechanism to tax cryptocurrencies before the vote.
“Regardless of necessary future crypto regulations, our contribution to put an end to this offshore is to subject crypto assets to the same rate applicable to capital gains on equivalent income.”
Portugal’s government may soon impose value-added tax (VAT), stamp duties, or property taxes on digital assets. This, after Antonio Mendonça Mendes, the country’s Deputy Minister for Finance and Tax Affairs, said during the same session of parliament that taxing crypto is a “complex reality” and that capital gains might not be enough.
A system that makes taxes ‘adequate’
There is no definite start date for the tax, nor is there a set rate. It will be paid on cryptocurrency investment gains, such as Bitcoin, the most valuable cryptocurrency in terms of market capitalization. This would overrule a 2016 tax law that stated that gains on Bitcoin could not be taxed since it is not legal tender.
Medina does not appear to have any plans to tax cryptocurrency earnings heavily.
He earlier went on to explain that designing and implementing a system that makes taxes “adequate,” but doesn’t “end up decreasing revenue to nothing,” is crucial.