The tax authority said that trading with cryptocurrencies is not an investment income. Portugal has a tax regime that is attractive to unusual tax residents.
The Portuguese Tax Authority (ATP) announced last month that trade and payments with cryptocurrencies would not be subject to value-added taxes (VAT), as reported by local media.
According to the announcement, payments with cryptocurrencies that are subject to service provision under the terms of article 9 (27) (d) of the Portuguese tax law are exempt from VAT. This only applies to natural persons, since companies based in Portugal are still subject to various taxes, such as VAT, social security and income tax.
This is just one of the points that show the tax advantages that can be exploited by cryptocurrency users in that European country.
Decision 5717/2015 is another announcement that benefits the use of cryptocurrencies in Portugal. The law states that the proceeds from cryptocurrency sales by natural persons will be exempt from tax. According to the decision published in February 2018, the sale of cryptocurrencies is not classified as capital gains if the cryptocurrencies are derived from the sale of financial products, as defined in Portuguese law, which is normally subject to a 28% tax rate.
In addition, cryptocurrency trading will not be considered an investment income, which is also subject to a 28% tax rate in other circumstances.
Portuguese Tax Regime
Those who know the Portuguese tax regime dot not find these two decisions surprising. Actually, Portugal is considered to be a very favorable country for taxpayers, with regulations especially designed to attract professionals with knowledge in the area of cryptocurrencies.
In addition to the tax exemption on cryptocurrency transactions, Portugal differs from many other European countries in the fact that it does not charge inheritance taxes, gifts or fortunes to its residents. This is one of the important tax benefits reserved for non-regular residents, as a strategy to attract high-value professionals from all over the world.
With these exemptions, Portugal seeks to attract mainly those who adjust to professions in the fields of STEM (Science, Technology, Engineering and Mathematics) and the arts, which are considered to be of high value, in addition to architects and investors, among others.
These non-regular high-value groups pay a 25% income tax rate, against a 48% rate that applies to other resident groups, in addition to a 28% tax rate on dividends, capital gains and investment income. This may explain why the Portuguese government exempts some cryptocurrency operations for other kinds of taxes.
Moving to Portugal
For those wanting to move to Portugal these may seem to be good enough reasons to move there. However, it is advised to check the country’s residence rules.
In Portugal, a person is considered a resident after having spent more than 183 days (consecutively or not) in the country within a period of 12 months. A person that becomes a tax resident and has not been taxed as a resident in the last five years may apply for the special tax regime for non-regular tax residents. However, within five years, there could be more countries treating cryptocurrency trading as a tax-free activity.
By Willmen Blanco