The finance minister plans to fill the gaps created by cryptocurrencies within the tax system – for capital gains, VAT, and other purposes.
Portugal’s Finance Minister Fernando Medina has confirmed plans to apply capital gains taxes on cryptocurrency profits. Though he has not committed to a specific date, he stressed that there can no longer be gaps within the tax system around transactions involving digital assets.
Ending the Tax Haven?
Cryptocurrencies are currently subject to very few tax rules in Portugal, making the country something of a crypto hub. However, the government finally committed to creating a fiscal framework for these assets on Friday, which will cover profits made through the sale of Bitcoin, among other things.
Minister Medina said it will examine relevant frameworks already created in other jurisdictions when building its own. He personally plans to prioritize “justice” and “efficiency”, ensuring that taxation is “adequate” while not being so high as to drive capital out of the region.
“It is an area in which there is a lot more knowledge and a lot more progress so that Portugal can drink from international experiences”, Medina said to other deputies.
Crypto taxation has reportedly been on the government’s agenda since March of 2021. At the time, António Mendonça Mendes –Secretary of State for Tax Affairs – requested a study on how other countries were already taxing such assets. However, due to the dissolution of parliament, the dossier was passed into the new legislature, which has resumed now.
For Mendes, taxing capital gains doesn’t go far enough for the crypto space. Shortly after the Finance Minister’s statements, he said that the government is also focused on how digital assets relate to the VAT and Stamp Duty (IS) tax systems.
“It also has its treatment for the purposes of property taxes and for the purposes of assumption [of income] in category B or category A,” he explained.
However, the Secretary of State noted that the biggest difficulty in creating this framework is to properly define cryptocurrencies. For example, the Court of Justice of the European Union and the European Central Bank are currently operating under two different classifications.
Crypto Growing in Portugal
As of now, Portugal’s crypto industry is seeing steady growth and adoption. Last month, the central bank gave its very first approval to a financial institution to begin offering crypto-related services.
In another first, a Portuguese home was purchased earlier this month directly using Bitcoin, without involving conversion to fiat money. A Portuguese island region called Madeira has even chosen to make the primary cryptocurrency a de facto legal tender.