Portugal Is Preparing Itself to Impose Individual Tax for Short-Term Cryptocurrency Gains

Subh Rath

October 12, 2022

As cryptocurrency demands, potential, and profits grow in the global market for individual investors, so does its gain for the government in the form of taxes. Even when some rare countries still give individuals the opportunity to enjoy tax-free crypto gains, most of the countries and their governmental tax policies are catching up with the cryptocurrency tax policies. 

Besides, gone are the days when crypto was just a rare and risky form of online currency whose future was hard to predict. Today, cryptocurrency and blockchain have become a prominent part of real-world necessities, being just as familiar and used as paper money in the real world, despite being limited to digital usage and benefits. 

Speaking of which, with the growing gains and demand for cryptocurrency, governments of countries around the globe have been bound to change their tax policies for more effective and all-rounded gains from such digital asset investment. One country to step into this list in recent times is Portugal. 

According to Portugal’s Finance Minister, Fernando Medina, the country has excused individuals from paying capital gains tax on cryptocurrency earnings for a long time. Hence, it’s time to pay up for the locals – earnings from crypto assets kept for less than a year are subject to a 28% capital gains tax.

Key Takeaway:

  • According to a 2023 budget draft shared with Portugal’s parliament on Monday, income earned from crypto assets maintained for a year or longer will remain tax-free.
  • If the budget is passed as planned, Portugal will be one of the last nations in Europe to allow taxpayers to keep the full benefits of their cryptocurrency profits.
  • This information was initially released as a warning to locals in May 2022, when Portugal’s tax administration said that the tax-free days of individual crypto earnings were ending.
  • For the time being, the budget only mentions cryptocurrency taxes in the context of capital gains. Still, as Portugal’s secretary of state for fiscal affairs pointed out, cryptocurrency makes taxing it difficult. Mendonça Mendes, a local Portuguese newspaper, said in May that crypto as property vs. crypto as revenue produces various tax arrangements. Furthermore, employing cryptocurrency as a form of payment generates a separate taxable event.
  • Portugal’s probable tax flip comes as the nation seeks to reduce its deficit and battle weak GDP growth. Windfall income from oil and gas corporations would be taxed under the budget plan, which would be a new addition to Portugal’s existing tax system.
  • According to the budget, Portuguese officials estimate GDP to rise by only 1.3% next year. According to Trading Economics, the country’s estimated debt-to-GDP ratio would reach 122% by the end of the year.
  • This is the third-highest figure in Europe, after only Greece and Italy. The average debt-to-GDP ratio in the EU is 95.6%.

What are your thoughts about this change in tax policy for individual crypto gains in Portugal?