Portugal to lose crypto tax haven status as state announces gains duties

Portugal to lose crypto tax haven status as state announces gains duties

The small Iberian nation is set to reverse a long-standing tax law that excluded crypto gains on the grounds that they are not legal tender.

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

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

There is not yet an effective date for the tax to start or a set rate, however. It will be levied on investment gains made from cryptocurrencies like Bitcoin (BTC), the largest crypto by market cap. This would reverse the tax law that was established in 2016 which stated that since crypto is not legal tender, gains cannot be taxed.

Medina said in a working session at Parliament that his rationale for the tax came about by comparing Portugal to countries that “already have systems” in place. Additionally, Sapo reported that Medina noted that it doesn’t make sense for an asset that creates capital gains to not be taxed. He said:

“There cannot be gaps that cause there to be capital gains in relation to the transaction of assets that do not have a tax.”

It appears that Medina will not impose a stifling rate of taxation on crypto gains. He explained that it is important to create and implement a system that makes taxation “adequate,” but which does not “end up reducing revenue to zero, which is contrary, in fact, to the objective for which it exists.”

At the Parliamentary working session, Mendes said that taxation of cryptocurrency is more complicated than most other assets because “there is no universal definition of cryptocurrencies and crypto assets.” He continued by stating:

“We are evaluating what regulations [fit] this matter […] so that we can present not a legislative initiative to appear on the front page of a newspaper, but a legislative initiative that truly serves the country in all its dimensions.”

Up until now, Portugal has been seen as a crypto tax haven that offers a permanent residency visa known as the Golden Visa because it grants holders special tax exemptions and a path to citizenship. The Golden Visa program was started as a means of attracting foreign investors. Industry observer Anthony Sassano saw the funny side:

Related: Crypto capital gains one of four key areas for Australian Tax Office

In February, an emigrant to Portugal praised the western Iberian nation for its adoption rate of crypto among merchants and even suggested Bitcoin could become legal tender there one day in an interview with Cointelegraph. However, he may have much to think about now that the tax law regarding crypto is set to be reversed.

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Portuguese regulator grants first crypto license to a bank

Portuguese regulator grants first crypto license to a bank

Bison Bank will offer its digital asset services to high net worth individuals, becoming the first banking institution in the country authorized to do so.

Portuguese based bank Bison Bank has received permission from Portugal’s Central Bank (Banco de Portugal) to operate as a “virtual asset service provider ”(VASP), making the first bank in the country to be given the green light by the regulator.

On Thursday, Banco de Portugal updated its list of virtual asset service providers adding “Bison Digital Assets” as the country’s’ fifth licensed crypto exchange. The company is newly created to operate under Bison Bank, which is fully held by a Chinese private capital firm based in Hong-Kong, and will position its crypto services to high net worth customers according to local media.

In April 2021, laws were established regulating cryptocurrency exchanges to a licensing regime operated by the central bank. La, later that year in June, licenses were granted to the exchanges Mind The Coin and Criptoloja, the first two VASPs permitted to operate in the country.

In March 2021, the regulator granted the first “all categories” VASP license to Utrust, allowing the exchange to offer crypto to crypto swaps, transfers to wallet addresses, and custody and storage of private keys on top of providing a fiat on-ramp. Bison Bank has also been granted an all categories license.

Portugal has long been thought of as a crypto friendly country and a crypto tax haven. There are no capital gains or personal income taxes on cryptocurrency unless it’s an individual’s sole income, as Portugal considers cryptocurrency a form of payment or currency, not an asset.

In April 2020 the country established plans to create Technological Free Zones (ZLTs), areas in which businesses can test products and services, with the country outlining that it was looking at testing blockchain technology as part of its digital transformation plan.

Related: Portugal slowly becoming a ‘haven’ for European Bitcoiners

In October 2021, the Portuguese government announced it was engaging public and private sector businesses along with experts to establish a working group to develop a National Blockchain Strategy. The group has been studying how the country could apply the technology, along with clarifying regulatory conditions.

The Portuguese government expects a draft of the strategy will be released at the end of this month, with a final version published in June 2022.

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