July 16, 2024

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Europe’s most crypto-friendly nation is planning to levy taxes on digital-currency gains for purchases held for less than a year.

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The move is a major policy shift as Portugal currently does not tax crypto gains other than professional or business activities. According to the plan submitted to parliament on Monday, Portugal’s proposed 2023 budget has made a provision to tax gains on crypto holdings held for less than one year at a rate of 28%.

However, the plan has stated that crypto assets held for more than 365 days will remain exempt from taxes.

Besides tax on digital-currency gains, the budget also consists of plans to issue new cryptocurrencies and mining operations as taxable income.

The draft budget still needs to be approved by parliament.

According to the budget plan, other taxes that will be introduced are a 10% tax on the free transfer of cryptocurrencies and a 4% rate on commissions charged by brokers on cryptocurrency operations.

The country has backed the new rules by supporting the crypto legislation in other European countries, including Germany. Investors in these countries do not have to pay 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 has attracted a growing number of digital nomads and cryptocurrency firms in recent years due to its lack of legislation, combined with affordable living costs and mild temperatures.

According to Portugal’s National Statistics Institute, the country has witnessed a 40% rise in foreign residents over the past decade to 555,299 people in 2021.

Bloomberg reported that 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.

The Portuguese government first announced plans to tax crypto income in May this year.

Fernando Medina, Portugal’s new finance minister, announced in the parliament in early May that crypto coins will be subject to taxation in the coming future.

Medina stated, “many countries already have systems; many countries are building their models in relation to this subject, and we will build our own”.

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