The Portuguese government has released a proposal to start taxing crypto by tax year 2023. Currently, Portugal is taxing income received crypto payments and full-time trading in crypto. Full time trading meaning, capital gains from buying and selling crypto assets on a regular basis. To qualify for a full-time crypto trader, it needs to be your main source of income. The Finanças decides if you are considered a full-time trader.
Personal Income Tax (IRS) The Proposal specifies that mining, staking and any other validation of cryptocurrency transactions through consensus mechanisms, qualified as commercial activities. This means that this income needs to be declared through a freelance activity (Category B).
The most simplified form of bookkeeping for a self-employed is Regime Simplificado. You are able to choose this option when your annual income from this activity, does not exceed €200,000 per year. If this is the case, you only need to give up 15% as your Personal Income Tax. The taxes to be paid over this 15%, depend on bracket your total annual income belongs.
If you earn more than €200,000 from your activity, you have the option to choose “Contabilidade Organizada” which translates in organized bookkeeping. To set your activity with Contabilidade Organizada, you will have to find a certified Portuguese accountant, who will calculate your net profits (annual profits – annual costs). Other options are to set up legal identities that involve corporate taxes.
Crypto Capital Gains Capital gains are the profits generated from buying and selling assets, in this case crypto assets. When the buying and selling took place within 365 days, the profits generated will be taxed in 2023. In Portuguese IRS, these gains will be taxed in category G.
The Holding period of assets acquired before 1 Jan 2023 is taken into account for the application of the exemption. In practical terms, this means that if you acquired in 1 Jun 2022 you can sell at 2 Jun 2023 and be exempt.
Stamp Duty (Imposto Selo) For gifts or inheritances of crypto assets, the Portuguese government wants to enforce a 10% tax rate on crypto transfers to entities with registered office, effective management, or permanent establishment in Portugal. If not deposited in Portugal, when the deceased was resident in Portugal, or the beneficiary of such gifts/inheritances is resident in Portugal.
Stamp Duty will also be charged to services that intermediate in crypto transactions. The rate of this taxation is 4%.
Reporting obligations People and businesses that provide crypto custody and administration services on behalf of third parties, or managing crypto-asset trading platforms, need to submit an official form to the Portuguese Tax Authorities. This form needs to be submitted until the end of January of each year, communicating what crypto operations were carried out.
When this services provider is outside Portugal, the person who must pay the tax is the intermediary in Portugal. If there is not intermediary, this service provider must appoint a representative residing in Portugal.
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