Crypto Tax in Portugal

Portugal, located in South-Western Europe, has many advantageous rules that attract foreign nationals from around the world who live, work and participate in financial activities. This status is evident in many official ratings: Portugal is considered one of the best places in the world for self-employed, expats and crypto traders.

When it comes to cryptocurrencies, current regulation in Portugal sees them as a form of payment, not an asset. Despite the fact that the national currency is the euro, payments using cryptographic visa cards are becoming more and more popular in the country, representing a strong advantage for crypto traders and investors. This also means that profits from cryptocurrency trading are not subject to VAT, which is not always the case at the international level.

TRADE VOLUMES AND TAX RATES

The most notable aspect of crypto taxation in Portugal is trade status, which sets the tax rate at 0%. It applies to individual traders who engage in trade rather sporadically and do not use it as a primary or secondary source of income.

Under this provision, which was introduced in 2016, another tax rate on cryptographic trade applies to persons who treat it as a professional activity. It is determined by the following criteria:

• Very regular activity
• High economic dependence compared to other sources of income
• Special physical premises for trading and related staff (if applicable)

It is important to note, however, that persons who meet some but not all criteria are automatically exempt from the cryptocurrency tax. In such cases, the final decision is taken on a case-by-case basis.

In a mandatory rule published, the PTA believes that capital gains from the sale of cryptocurrencies will not be taxed (crypto fiat as well as crypto to crypto) under the Personal Tax Code, under category E (dividends and interest income)and are not taxable under category G (capital gains).

In addition, the PTA believes that profits earned from the sale of cryptocurrencies are taxed only at a personal level if their regularity is ultimately the professional or business activity of the taxpayer, In this case, it will be taxed as corresponding income under category B (freelancing) of the Personal Tax Code.

This applies to individuals who trade in cryptocurrencies with high regularity and formally treat crypto trading as a professional activity. When it comes to declaring profits, profits associated with cryptocurrency are not regarded as dividends and interest income, nor as capital gains. Instead, they fall under freelance income (income category B). In turn, the rate of personal income tax applies. Depending on the annual earnings, it can vary from 14.5 to 48%.

Finally, companies that provide cryptocurrency trading services are also subject to income tax. Currently, it is set at a fixed rate of 21%. However, additional local and state taxes may apply.

In the context of financial activities related to cryptocurrencies, each tax category listed above applies to both crypto-fiat exchanges and crypto-crypto exchanges.

How do I pay taxes on crypto in Portugal in 2024?

In 2024, the issue of taxation of cryptocurrency income in Portugal continues to attract the attention of investors and digital currency users. Portugal has become known for its relatively favourable tax regime for cryptocurrency transactions, but it is important to understand exactly what rules apply to different types of cryptocurrency income in order to avoid tax mistakes and maximise your financial results. In this article, we will look at the main aspects of cryptocurrency taxation in Portugal in 2024.

Main Taxation Provisions for Cryptocurrencies in Portugal

Portugal offers one of the most attractive tax regimes in Europe for cryptocurrency investors and users. The main characteristics of the tax regime are:

• No capital gains tax for private investors who do not conduct professional activities related to cryptocurrency. This means that income from buying and selling cryptocurrencies for personal investment is generally not taxable.
• VAT and income tax do not apply to cryptocurrency transactions if these transactions are not commercial activities.
• Taxation of professional activities. Income from cryptocurrency-related activities considered as professional or entrepreneurial activities may be taxed in accordance with the general rules of income taxation.

How to Pay Taxes

1. Determining the status of the activity. It is important to correctly determine whether your cryptocurrency activity is a personal investment or a professional activity. In the latter case, it is necessary to declare the income and pay taxes according to the Portuguese tax legislation.
2. Record Keeping. Regardless of whether your income is taxable or not, it is advisable to keep careful records of all cryptocurrency transactions. This may be necessary to confirm the nature of your investments in case of a tax audit.
3. Consultation with a tax advisor. Given the complexity of tax laws and the rapidly changing nature of the cryptocurrency market, it is highly recommended that you consult a qualified tax professional to help determine your tax liability.

Conclusion

Portugal provides one of the most favourable tax regimes for cryptocurrencies among European countries, especially for private investors. The absence of capital gains tax for non-professional investors makes it an attractive place to hold and trade cryptocurrency. However, as with any jurisdiction, it is important to consider taxation carefully and take into account possible changes in legislation. It is always advisable to obtain professional tax advice to ensure compliance and optimise your tax burden.

 

Table with the main tax rates in Portugal for 2024. This table includes information about the rates of personal income tax (IRS), corporate income tax (IRC), value added tax (VAT), and also mentions the specifics of taxation of cryptocurrency income.

These rates provide an overview of the Portuguese tax system. However, it is important to remember that tax laws can change and there are specific conditions or deductions applicable to your situation.

If you are interested in creating a cryptocurrency trading company in Portugal or trading cryptocurrencies as a professional activity, contact RUE for legal guidance and administrative assistance. Our team will help you to confidently navigate the administrative part of your business, ensuring full compliance with all requirements at each stage. The experienced lawyers at Regulated United Europe (RUE) will be happy to guide your company through the entire cryptocurrency licensing process in Portugal and familiarise you with all cryptocurrency regulations in Portugal.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.