This country’s tax rate has just gone through the roof
Crypto tax: The new regime will allow gains from assets held for more than 12 months to be exempt.
Lawmakers in Portugal are proposing a 28% tax on profits from crypto assets held for less than a year. This was revealed in the country’s 2023 budget sent to parliament on 10 October 2022.
Is Portugal losing its crypto haven status?
Under the new law, recipients of token airdrops may have to pay a 10% tax, while those categorized as crypto brokers may have to pay a 4% tax on any commission.
“It is a regime that fits in with our tax system and also with what is done in the rest of Europe,” said António Mendonça Mendes, a senior tax official. In Germany, crypto investors do not pay tax for crypto held for a year or more. The bill must be passed by the Storting in order to become law.
In response, technical analysis trader Michaël van de Poppe pointed out that no one has made a profit in the past year:
Until now, Portugal has only imposed taxes on crypto business transactions and professional trading activity. It soon became a destination of choice for retail crypto investors, offering mild weather and a lower cost of living than other European countries. In the wake of the pandemic, many remote workers moved to the country to escape expensive life in cities such as London.
Tax laws
Crypto Viking, a self-described crypto enthusiast, believes that it was Portugal’s lack of intent in drafting tax laws that led people to believe it was a crypto-friendly destination:
As of August 2022, five crypto companies had set up shop in the country, namely CriptoLoja, Digital Luso, Utrust, Mind the Coin and Bison Digital assets. While this was a welcome development for the country’s new crypto migrants, banks initially refrained from allowing the crypto firms to open and operate accounts due to non-compliance with risk policies.
In May 2022, the country conducted its first ever crypto-only real estate transaction, where the buyer paid the seller directly in crypto without prior conversion to euros. In the same month, parliament rejected proposals by left-wing parties Bloco de Esquerda and Livre to introduce crypto taxes.
Crypto tax: Portugal remains crypto-friendly (for now)
The fate of the proposed tax regime, which is still in the draft phase, will likely not be decided until 2023. This means that for now, short-term crypto holders would be wise to either cash out their crypto or dig in their heels for the long haul. term.
Portuguese crypto companies would do well to ensure they are well capitalized should the government impose taxes, lest they suffer the same fate as some Indian exchanges after the government proposed a 30% tax on crypto assets earlier this year.
While larger exchanges like Binance saw an increase in app downloads, smaller companies like CoinDCX saw their downloads drop from 2.2 million in January to 163,000.
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