Crypto assets, including cryptocurrencies, will become subject to taxes in Portugal, a country that is touted as a tax haven for investors in this market.
The current law does not allow the Finances to tax the income obtained from these transactions, as it does not foresee this new reality, but the Government committed itself this Friday to creating an adequate framework that includes, among other things, the taxation of the most important gains from the sale of cryptocurrencies such as bitcoin.
It was the Minister of Finance, Fernando Medina, who confirmed it during a hearing in the Assembly of the Republic. The information was then seconded and deepened by the Secretary of State for Tax Affairs, António Mendonça Mendes, in response to questions from the deputy of the Left Bloc Mariana Mortágua. However, Medina did not commit to a date.
“Portugal is in a different situation, because, in fact, several countries already have systems. Several countries are building their models regarding this matter and we are going to build ours. I do not want to commit myself to a date at this moment, but we will adapt our legislation and our taxation ” , said the minister, in a working session related to the discussion in the specialty of the State Budget for 2022.
Having said that, the minister defended that there cannot be “gaps that cause there to be capital gains in relation to the transaction of assets that do not have a tax”. From now on, the holder of the Finance portfolio has promised to follow principles of “justice” and “efficiency”, so that “a system is created that makes taxation adequate, but does not make taxation an exceptional character that ends up reducing revenue to zero, which is contrary, in fact, to the objective for which it exists”, he explained.
These statements thus confirm the information that the ECO has been releasing since last year on the taxation of cryptocurrencies. The topic was on the agenda of the previous Government, with Mendonça Mendes still asking in March 2021 for a study on how other countries are already taxing crypto assets , as was reported last week . But the dissolution of Parliament threw the dossier into this new legislature, which should be resumed now, with a new finance minister in office.
“It is an area in which there is a lot more knowledge and a lot more progress so that Portugal can drink from international experiences”, Medina told the deputies.
Taxes Go Beyond Capital Gains
Shortly after Medina's statements, the Secretary of State for Fiscal Affairs took the floor to delve deeper into the issue. Mendonça Mendes said that the Government's work is not only focused on the taxation of capital gains, but also on the framing of crypto-assets in other types of taxes, such as VAT and Stamp Duty (IS).
“I wish the taxation of cryptocurrencies was as simple as Ms. deputy [Mariana Mortágua] states. But I would like to say that since March 4, by an order of mine, the Center for Tax Studies has been making an assessment regarding the taxation of the reality of cryptocurrencies ”, said the minister.
"Mrs. deputy is restricted to the taxation of cryptocurrencies in terms of capital gains, but cryptocurrencies are a much more complex reality than taxation in terms of capital gains. There is also the issue of use as a means of payment and its treatment for VAT purposes, for IS purposes. It also has its treatment for the purposes of property taxes and for the purposes of assumption [of income] in category B or category A”, explained Mendonça Mendes.
The Secretary of State went further and listed the challenges that the Government has faced in this process: “The first difficulty we have faced is probably the same difficulty that Ms. the honorable Member is faced with in order to be able to rigorously address this issue. Because, of course, there is no universal definition of cryptocurrencies and cryptoassets.” Mendonça Mendes even said that the position of the Court of Justice of the European Union and the position of the European Central Bank (ECB) task force that is working on the matter are “different”.
“We are evaluating, from the point of view of international comparability, what is the definition of crypto-assets, which includes cryptocurrencies. We are evaluating what regulation is in this matter, whether in terms of combating money laundering, or in terms of regulating these markets , so that we can present not a legislative initiative to appear on the front page of a newspaper, but a legislative initiative that truly serves the country in all its dimensions”, he concluded.
Finally, the Secretary of State defended that the Government “is leading” the work of defining the appropriate tax framework for cryptocurrencies.