Portugal’s economy has a strong and wide base. After the global crisis of 2008, the country took solid steps. Diversifying its financial portfolio, Portugal managed to attract investors from everywhere. This resulted in a stable economy fed by every kind of currency. The spectrum includes cryptocurrency, too.
The only problem for investors was the cryptocurrency’s very short history. Cryptocurrencies entered the market very recently. Most countries do not have financial laws that clearly state the policies on this new form of asset. Yet, Portugal solved this problem. Portugal now has definite cryptocurrency laws. Thus, the country’s market is a solid ground for cryptocurrency traders. The interest of cryptocurrency users in the Portugal Golden Visa proves this trend.
Financial Policies Governing Cryptocurrency in Portugal
Portugal had laws regulating cryptocurrency for a while. Yet, these laws only stated that revenue made through cryptocurrency trade should be exempt from VAT. The regulations gave no further information about the legislation on cryptocurrency. This outline was published in 2016.
The Portuguese Tax Authorities (Autoridade Tributaria e Aduaneira) recently clarified the legal status of cryptocurrency in Portugal. The statement was given in response to the inquiry of a company that aimed to use cryptocurrency. The report is also published in the Journal de Negocios. The document reported that cryptocurrency is no different than other currencies according to Portuguese Law.
Taxation of Cryptocurrency in Portugal
There are three methods investors use to produce revenue using cryptocurrencies. These are:
- Buying and selling crypto-coins
- Commission profits from the buy or use of cryptocurrency
- Profits over sales using cryptocurrency
Cryptocurrency is exempt from VAT in Portugal. The Portuguese Tax Authorities states, “An exchange of cryptocurrency for ‘real’ currency constitutes an on-demand, VAT-free exercise of services.” The quote suggests that profits made by buying and selling cryptocurrency are not subject to taxation. Moreover, exchanging cryptocurrency with other currencies will not be taxed either.
Individuals are not taxed based on their income in cryptocurrency. Yet, registered companies must pay taxes on their revenues. This rule applies to cryptocurrency like any other currency. The rate of this tax varies between 28% and 35%.
Why Should Businesspeople Using Cryptocurrency Consider Portugal?
Since cryptocurrency is a new form, many countries are suspicious of it. Regulations towards cryptocurrency are quite strict. These restrictions tighten the space where cryptocurrency users freely partake in business activities. Portugal is one of the countries that choose to protect the freedom of these users.
Does Portugal Accept Payments in the form of Cryptocurrencies?
Currently, Portugal does not allow every form of payment in cryptocurrencies. Yet, the area of service continuously widens. Portugal gradually dissolves the restrictions around the usage of cryptocurrency. For instance, Global Citizen Solutions (GCS) accepts payments in cryptocurrencies. This way, investors may apply for Portugal Golden Visa and pay with cryptocurrencies. The accepted cryptocurrencies are Ripple, Bitcoin, and Etherium. The portal to be used for these transactions is Coingate.
Also, some regulations limit the entire resident population of countries. For instance, ICO’s (Initial Coin Offerings) do not accept initiations with a US address. So, it makes sense for cryptocurrency users to get residency in another country. A country, like Portugal, that does not frown upon the usage of cryptocurrencies will do the trick.
The Non-Habitual Tax Regime of Portugal is Another Attraction for Investors
Portugal is attractive to investors in general. The Non-Habitual Tax Regime (NHR) of Portugal is one of the incentives. This regime provides an alluring space for investors to carry their business activities into Portugal. The program grants new startups and high net worth investors with allowances. Also, it involves many tax reductions. Encompassing cryptocurrencies, the NHR is an investor-friendly scheme.
How Does Portugal Golden Visa Protect the Cryptocurrency Users?
The Portugal Golden Visa Program is a residence by investment scheme. Investors outside of the EU region may apply to the program. Applicants who invest in Portugal receive a Portuguese residence permit. Permit holders must stay in the country for at least seven days per year. After five years, residents may apply for naturalization.
This extra residency allows the diversification of assets. It means that one can move their asset to a safer place. Or, they can keep their assets in multiple countries to protect them. This way, the assets are protected against threats in investors’ home country. Policy changes or financial crises no longer affect the assets. The Portugal Golden Visa Program provides investors with this protection. Since cryptocurrency regulations in many countries are not clear yet, diversifying these assets is a good idea.
How Does Portugal Tax Income in the Form of Cryptocurrency?
Cryptocurrency income in Portugal is not taxed on an individual basis. This means that individuals who receive their wages in cryptocurrency are not taxed. Yet, companies using cryptocurrency in their payments are subject to income tax.
Income tax in Portugal is required if a product is involved. If the transaction is among cryptocurrencies, the activity is not subject to taxation. Yet, if there is a product or a service involved, the income is taxed.
Does Portugal Impose VAT on Cryptocurrency Exchanges?
Portugal’s recent statements clarify the policy on VAT on cryptocurrency. According to the statements, cryptocurrencies are the same as other currencies. Thus, cryptocurrency exchanges are exempt from VAT.
Does Portugal Impose Capital Gains Tax on Cryptocurrency Income?
The regulation on capital gains is like the income tax. The revenue from buying and selling cryptocurrency is not subject to taxation. Yet, companies who receive capital gains through cryptocurrency transactions are taxed on their revenue. The capital gains tax rate for companies changes between 28% and 35%.