Crypto regulation in Portugal

Crypto Regulation in PortugalPortugal is often called the most attractive country in Europe for working with cryptocurrency and digital assets. This status is influenced not only by the Government’s liberal policy on digital assets, but also by the overall economic and social development of the country.

The Central Bank and other authorities have already taken some specific measures to regulate crypto-assets in Portugal in accordance with the European legal framework, especially with regard to measures to protect against money-laundering (AML) and/or the financing of crime.

Framework

For such purposes, cryptocurrencies can be defined broadly as a «digital representation of value not issued by a central bank, credit institution, or e-commerce, which in some circumstances can be used as an alternative to money». This definition corresponds to the classification of the European Central Bank (ECB), to which the Portuguese authorities have largely subscribed. Other regulations on crypto assets were developed by the European Securities and Markets Authority (ESMA) in its recommendations on ICOs and crypto assets (January 2019).

Due to the rapid development of the Fintech industry, blockchain technology in general and cryptocurrency in particular are the subject of discussion by the Portuguese government.

Over the past few years, these technologies have attracted public attention mainly because of the rising cost of Bitcoins, the increased interest in holding ICOs in Portugal and other countries, and their market capitalization.

In this country, cryptocurrencies do not have the status of legal tender and are not classified as fiat, nor are they considered as «money» or «electronic money». However, EBA issued a statement in 2019. It noted limited cases where cryptocurrencies can be considered «e-money» according to Directive 2009/110/EC (EMD2).

However, cryptocurrencies are largely seen as an alternative payment method with a contractual nature that is the result of a private agreement between cryptocurrency transaction participants, and with internal characteristics, which to some extent repeat the main features of traditional money:

  • Storage of value
  • Unit of account
  • Medium of exchange

In general, cryptocurrencies are not supported by the Portuguese government or the Central Bank, but are treated as financial instruments in certain cases.

Cryptocurrencies are also considered for their functionality. Regulators deal with utilite tokens and security tokens, which are usually sold through ICOs. They can be distinguished by their distinctive function, since the former are largely related to consumption and the latter to investment.

That is why the issue of regulation of these technologies has become an important topic for the attention of the relevant authorities, especially the Central Bank, the Portuguese Securities Office (CMVM) and the ASF. The CB has issued a number of public statements and warnings on cryptocurrencies in line with the regulatory practices of other eurozone central banks and European regulators such as the ECB and the EBA.

If you intend to obtain a crypto license in Portugal, it is important to bear in mind that the Central Bank has relatively recently issued Notice 3/2021, in which it regulates the registration of virtual asset service providers (VASP)that are operating in Portugal as a result of the transposition of EU Directive 2018/843 of 30 May 2018 into Portuguese law, in particular into the Portuguese AML system approved by Law 83/2017.

In turn, CMVM published warnings to investors about potential ICO risks to raise awareness of these risks. On July 23, 2018, CMVM issued a formal notice to all ICO participants regarding the legal qualification of tokens.

The CMVM stressed the need for all ICO participants to appreciate the legal nature of the tokens offered by the ICO, their possible qualification as securities, and the subsequent application of securities law. In this context, CMVM noted that tokens can represent very different rights and credits and can be sold in organized markets.

Therefore, if you intend to conduct an ICO in Portugal, it is worth taking into account that tokens can be classified as securities under Portuguese law, especially given the broad definition of securities under the Securities Code.

Crypto regulation in Portugal overview

Period for consideration
5 months Annual fee for supervision No
State fee for application
475 EUR Local staff member Required
Required share capital No Physical office Required
Corporate income tax 21% Accounting audit Required

AML-requirements

The above service providers are subject to the general AML framework for non-financial organizations. Such entities should, inter alia:

  • Monitor the risks associated with money-laundering and the financing of terrorism as a result of the development or use of new technologies;
  • Exercise due diligence in the client’s business, non-recurrent or ongoing operations;
  • Development and implementation of policies, procedures and controls to manage money-laundering risks;
  • Identification of customers and business owners (according to the KYC procedure);
  • Collection and storage of customer relationship information;
  • Analyse and scrutinize transactions based on risk assessment;
  • Report suspicious transactions and cooperate with competent authorities.

A common set of indicators (trigger events) should be used to identify suspicious transactions. These include the «red flags» recommended by FATF (Financial Action Task Force on Money Laundering). Among them are:

  • Transaction-related indicators: size, frequency and nature of transactions;
  • Anonymity indicators;
  • Indicators by sender and receiver: data on customers and irregularities;
  • Indicators on the origin of funds;
  • Indicators on geographical risks (counterparty jurisdiction).

High BFR risk is traditionally associated with certain categories of persons:

  • Persons and organizations working in offshore zones;
  • «Politically significant persons» (including «close family members» and «persons with recognized and close corporate or commercial relationships»);
  • Individuals and entities on the United Nations Security Council sanctions lists, OFAC (Office of Foreign Assets Control of the US Treasury), the EU Council, etc.;
  • Natural and legal persons designated in sectoral regulations to enhance precautionary measures.

ICO REGULATIONS

ICOs that seek to offer tokens that represent rights and/or economic interests in a predetermined enterprise, project or company can potentially qualify as securities and be subject to existing securities rules, primarily rules, applicable to the public offering of securities and/or trading platforms. The launch of ICO in Portugal can be regulated by EU legislation, such as:

CMVM stated that the token that allows its users to participate in surveys related to the development of the online platform, as well as further donation of tokens to the online platform, is not considered a finishing tool, that is, not a security token. The regulator clarified the characteristics which, in an abstract form, may imply the qualification of securities tokens as securities, namely:

  • If they can be considered to be members of special economic rights;
  • if marker functions are similar to typical securities.

The CMVM also regulates that if the token has securities characteristics and the ICO is offered to investors from Portugal, such transactions should be regulated by national and EU laws that are related to:

  • Issue, representation and transfer of securities;
  • Proposal to the public (if applicable);
  • Marketing of financial instruments for the purposes of MiFID II;
  • Quality requirements for information; and
  • Market abuse rules.

Finally, if the ICO qualifies as a public offer, CIM further clarifies that the prospectus must be drafted and submitted with any marketing material for the ICO for approval by the CIM, provided That there will be no exceptions to the obligation to prepare a prospectus.

VASP PROCEDURE

As mentioned above, the Anti-Money Laundering Act introduced a mandatory registration requirement for all LCA activities in Portugal. The registration procedure must be established in accordance with Article 112-A of the AML Act and Notice 3/2021 of 24 April 2021 of the Bank of Portugal.

The following organizations operate in Portuguese territory:

  • Portuguese companies (registered in Portugal);
  • Legal entities with permanent representation in Portugal; and
  • Organizations that are obliged to operate under the control of the Portuguese tax authorities.
  • The Central Bank is the competent authority to register cryptographic companies in Portugal and to verify compliance with applicable legal and regulatory provisions governing the use of the AML by the above-mentioned persons.

According to the Portuguese Anti-Money Laundering Law, since VASP is now considered a ‘liability'”, the general obligation to manage risks when using new technologies or products that promote anonymity is mandatory. This means that QSP is required by law to monitor, analyse and document specific procedures to address any specific risks associated with money laundering and the financing of criminal activities. In addition, authorized persons must carry out procedures to identify and properly screen clients for transactions involving more than 15,000. EUR, as well as strengthen its procedures of identification and due diligence of customers when they find an additional risk of money laundering or financing of business crimes.

TAXATION

Portugal does not have a special regime regarding the tax regime of cryptocurrencies. However, the tax authority has issued three rules regarding cryptocurrencies. In the absence of other laws and regulations that could clarify the tax regime of cryptocurrencies, these rules are important and will work as precedents on whether Portugal’s Tax Administration will consider cryptocurrency and cryptocurrency-In interpreting the existing tax provisions and deciding whether certain facts or acts are subject to Portuguese taxation (corporate, individual, VAT or stamp duty).

Companies that provide services related to cryptocurrency are taxed on capital gains of between 28 and 35%.

Our highly qualified and reliable lawyers will be happy to provide you with individual support in registering with the Virtual Currency Register and in obtaining a cryptographic license in Portugal. We closely follow local regulations and are therefore well prepared to effectively guide our customers at every stage of the registration process.

Establish a Crypto Company in Portugal

Two years ago, the Portuguese government announced the Digital Transition Action Plan, which included technological free zones that were designed to allow for experimentation with blockchain and other new technologies in space, That replicate the real world. Undoubtedly, such an approach makes Portugal one of the most crypto-friendly countries, so it deserves your attention. Regardless of your nationality and residence status, you can establish a cryptographic company in Portugal and take advantage of this business environment.

Distinctive features of the Portuguese business environment:

  • Attractive tax incentives and incentives for residents (for example, withholding tax is levied on only 50% of resident dividends)
  • A thriving technology industry attracting significant venture capital
  • Portugal is a member of the EU, making its way to the European single market
  • Portugal ranks 39th among 190 countries in the Easy of Doing Business 2019 ranking of the World Bank, which indicates a fairly favorable business environment (based on the ease of opening and financing the company and participation in economic activities)
  • Portugal ranks 31st out of 177 countries in the Economic Freedom Index 2022, with judicial efficiency, tax burden, regulatory efficiency, freedom of investment, etc.
  • Young but qualified, knowledgeable and at the same time accessible talents, well supported by the Portuguese education system
  • Portugal ranks sixth in the 2022 Global Peace Index, which reflects stability and a safe, sustainable environment
  • Lisbon is home to a web summit, one of the largest global technology conferences, as well as various governmental and non-governmental initiatives, helping the blockchain industry grow

The main piece of legislation governing companies in Portugal is the Commercial Company Act. It covers such areas as the incorporation of various types of entities, management and shareholder rights.

The public register of Portuguese companies is maintained by the Portuguese Commercial Registry who’s also responsible for the updates of commercial records and documents, certificates of registration and dissolution.

Every company intending to start crypto-related activities in Portugal is classified as a virtual asset service provider (VASP) which must obtain a licence from the Banco de Portugal prior to commencing business. The authority is responsible for enforcing AML/CFT regulations in line with the EU’s directives.

To operate in Portugal, your company may also have to register with the Portuguese Securities Market Commission (CMVM) which supervises companies whose crypto activities are related to cryptoassets that legally qualify as securities or instruments equivalent to them.

No restrictions or obligations to declare cryptocurrency assets

No minimum share capital requirement for the company

No income tax on cryptocurrency income

Possibility to purchase real estate for cryptocurrency

Types of Portuguese Business Entities

To create a crypto company in Portugal, you can choose either Private Limited Liability Company (Lda) or Public Limited Company (SA). Their shareholders are responsible only for the company’s obligations within the limits of their investments.

Documents required to establish a limited cryptography company in Portugal:

  • Charter (should be in writing and signatures of founders should be verified by a witness)
  • Business plan
  • White paper
  • Documented risk management policies and procedures (AML/CFT, data protection, etc.)
  • Identity documents of shareholders, directors and compliance officers
  • Evidence of no criminal record from shareholders, directors and supervisory officers (obtained within the last three months)

The following general rules apply to any company:

  • The company shall have an indefinite term of validity if its term is not determined by the charter
  • Initial capital contributions must be made prior to the signing of the Charter, unless cash contributions are deferred under conditions permitted by law
  • The value of the company’s equity must always be expressed in euros, the legal tender of Portugal
  • Appointed Directors must demonstrate readiness, technical competence and understanding of the company and the entire business model

Regardless of the legal structure of the business, each crypto company must comply with the following conditions:

  • Development and implementation of internal AML/CFT procedures
  • Recruit an anti-money laundering/terrorist financing officer

Private Limited Liability Company (Lda)

Private limited liability company (Lda) is one of the most commonly used legal business structures in Portugal. Since the transfer of shares is limited, this structure is usually chosen to create small and medium-sized businesses.

Other features of a private limited liability company (Lda):

  • The name of the company consists of a freely selected part, a link to the respective business area and the word Limitada or its abbreviation Lda
  • At least two shareholders (natural or legal persons, no residence requirement)
  • At least one director (may be a shareholder, no residential requirements, but the Bank of Portugal expects the director to be a resident of Portugal)
  • No obligation to appoint a board of directors
  • An accountant who has to fulfill tax obligations;
  • The General Meeting is the governing body of the company, consisting of at least one director and accountant
  • No capital requirements, but each quota must be at least 1 EUR
  • Registered office is a precondition (in this case, Portuguese authorities will send notifications, invoices and other official documents)

An annual audit of a company’s financial statements requires either an independent auditor or a review board if at least two of the following amounts have been exceeded for two consecutive years:

  • Net revenue – 3 mill. EUR
  • Total balance sheet – 1,5 mill. EUR
  • The average number of employees – 50

Public Limited Company (SA)

This type of enterprise is chosen by entrepreneurs who plan to raise funds by offering shares to the general public, allowing them to accumulate much more capital and build businesses on a larger scale than private companies. On the other hand, State-owned companies are subject to stricter regulatory requirements.

The main features of the joint-stock company (SA):

  • The name of the company consists of a freely selected part, a link to the respective field of activity and should end with SA
  • At least five shareholders (if one is a State, only two shareholders are required)
  • One director if the share capital does not exceed 200000 EUR
  • Minimum equity – EUR 50,000 (70% of cash contributions can be deferred for up to five years)
  • Minimum nominal value of the share – 0.01 EUR
  • General meetings are required regardless of the type of management structure

A Public Limited Company (SA) may have one of the following management structures:

  • Board of Directors or one Director if the share capital is less than EUR 200,000 and a statutory audit board of at least three members or an independent auditor
  • Board of Directors, three-member audit committee and independent auditor
  • Board of Directors or one director if the share capital is less than EUR 200,000, General Supervisory Board and independent auditor

An annual audit is mandatory for each public company regardless of its size. Such companies should appoint an auditor who can act either as the sole overseer of the company or as a partner of the company’s supervisory board, depending on the management structure. The auditor may be an individual or a company registered with the Portuguese Professional Association of Chartered Accountants.

WHAT YOU NEED TO DO

The Portuguese limited liability company could be registered within two weeks, but the licensing process could take several months.

To create a cryptocurrency company in Portugal, take the following steps:

  • Check and reserve the appropriate name (submit three options) before registering
  • Prepare the necessary documents
  • Office rental for legal business address and local staff
  • Open a Portuguese bank account
  • Transfer equity
  • Pay company registration fee
  • Regular registration – 475 EUR
  • Accelerated registration 950 EUR
  • Submit an application for registration of the company together with the necessary documents to the Portuguese Trade Register
  • Apply for a cryptography license at the Bank of Portugal
  • Apply for registration with CMVM if your proposed activity includes cryptoassets that qualify as securities
  • Submission of the final declaration of beneficial ownership (CBO) to the Central Register of Beneficial Ownership
  • Recruitment of personnel in accordance with the law
  • Registration as a taxpayer with the Tax and Customs Board
  • Registration of employees in the social security system
  • Obtaining a company seal when the certificate of registration is issued

Each cryptographic company must be fully licensed by Banco de Portugal as VASP before economic activities begin. Compliance with AML/CFT rules is the key to successful licensing.

Taxation of Crypto Companies in Portugal

Portuguese taxes are collected and administered by the Tax and Customs authority which doesn’t consider cryptocurrencies legal tender but admits that they can be profitably exchanged for fiat money via intermediary platforms and highlights that the value of cryptocurrencies is determined by online demand.

For tax purposes, all cryptocurrency transactions must be duly recorded and reported in Portugal’s legal tender which is the euro.

In Portugal, crypto companies are obligated to pay the following taxes:

  • Corporation Tax – 21% (for the first 15,000 EUR of profit – 17%)
  • Value Added Tax (VAT) – 23%
  • Social Security – 23,75%
  • Municipal Business Tax – up to 1,5%
  • Dividends Withholding Tax – 28%

If shareholders are non-residents of Portugal, the company must apply for a Portuguese Taxpayer Number (NIPC/NIF). If the shareholders are non-EU residents, it’s mandatory to appoint a tax representative who’s a resident of Portugal (either a company or an individual).

Reporting requirements

Each cryptographic company is required to submit approved annual and other financial statements to the Portuguese Trade Register.

In addition, each company must provide the following documents at the request of interested parties (on the site and in its registered office):

  • Annual report
  • Audit report
  • Opinion of the Supervisory Board, if applicable

As a rule, the annual report and financial statements should be submitted to the appropriate bodies for review within three months of the end of the financial year. If the first financial year is different from the calendar year, the financial year should be between 6 and 18 months.

The annual report should contain at least one clear and transparent analysis of the status and progress of the company, its activities and market position, as well as a description of the main risks and uncertainties to which the company may be exposed. It should include a description of financial, labor, environmental and other relevant issues and references to amounts reported.

The report should indicate the following:

  • Evolution of different business areas during this period in terms of market conditions, initial capital investments, costs, profits and R&D activities
  • Material developments since the end of the financial year
  • Company forecasts and prospects
  • If applicable, the number and nominal value of quotas or equity shares redeemed or sold during this period, the reason for such purchase or sale and the appropriate price, as well as the total number and face value of any quotas or equity, Balance at the end of the financial year
  • Authorizations issued under art. 397 for transactions between directors and company
  • Profit proposal
  • Corporate Affiliates Review
  • Review of internal policies and objectives related to financial risk management

If you foresee the future of your crypto company in Portugal, our trusted and dynamic team of the Regulated United Europe (RUE) will be happy to support you at every stage. We provide comprehensive legal advice on company creation, crypto-licensing and taxation. In addition, we will be happy to intervene if you need financial accounting services. Contact our specialists today for advice.

Additional information

our team

julia

Julia
Allik

CHIEF EXECUTIVE OFFICER

[email protected]

jekaterina

Jekaterina
Smolits

SENIOR LAWYER

[email protected]

Diana

Diana
Nossenko

CORPORATE LAWYER

[email protected]

kristine

Kristine
Ella

LEGAL ADVISOR

[email protected]

Diana

Diana
Hamdamova

Company Formation Executive

[email protected]

Milana

Milana
Scherbakova

Company Formation Executive

[email protected]

vasilina cryptocurrency Estonia

Vasilina
Kreida

Accountant

[email protected]

svetlana cryptocurrency Lithuania

Svetlana
Gertsen

Accountant

[email protected]

CONTACT US

At the moment, the main services of our company are legal and compliance solutions for FinTech projects. Our offices are located in Tallinn, Vilnius, and Warsaw. The legal team can assist with legal analysis, project structuring, and legal regulation.

Company in Estonia OÜ

Registration number: 14153440
Anno: 16.11.2016
Licence number: FIU000186
Phone: + 372 5611 0164
Email: [email protected]
Address: Sepise 1, Tallinn, 11415, Estonia

Company in Lithuania UAB

Registration number: 304377400
Anno: 30.08.2016
Phone: +370 661 75988
Email: [email protected]
Address: Lvovo g. 25 – 702, 7th floor, Vilnius, 09320, Lithuania

Company in Poland Sp. z o.o

Registration number: 38421992700000
Anno: 28.08.2019
Phone: +48 50 633 5087
Email: [email protected]
Address: Twarda 18, 15th floor, Warsaw, 00-824, Poland

Please leave your request