Portugal is planning to start taxing digital-currency gains on purchases held for less than a year in a major policy shift for one of Europe’s most crypto-friendly nations.
Portugal currently does not tax crypto gains unless they come from professional or business activities. But that’s about to change. A provision in the country’s proposed 2023 budget would tax gains on crypto holdings held for less than one year at a rate of 28%, according to the plan submitted to parliament on Monday. Crypto assets held for longer than 365 days will continue to be exempt from taxes, it said.
The draft budget, which still needs to be approved in parliament, would also consider the issuance of new cryptocurrencies and mining operations as taxable income. The government also will introduce a 10% tax on the free transfer of cryptocurrencies and a 4% rate on commissions charged by brokers on cryptocurrency operations, according to the draft budget.
Portugal said the new rules are in line with crypto legislation in other European countries, including Germany, where investors pay no taxes if they hold cryptocurrencies for more than a year.
“It’s a regime that fits into our tax system and also to what is being done in the rest of Europe,” Secretary of State for Tax Affairs António Mendonça Mendes said at a press conference in Lisbon.
The country’s lack of legislation, combined with affordable living costs and mild temperatures has attracted a growing number of digital nomads and cryptocurrency companies in recent years.
The number of foreign residents living in Portugal rose 40% over the past decade to 555,299 people in 2021, according to Portugal’s National Statistics Institute. Some of these residents also benefit from a flat 20% tax on their income or a 10% tax on their pensions, according to the country’s so-called non-habitual resident program.