Portugal’s reputation of being one of the most crypto-friendly nations is at stake as its Finance Minister Fernando Medina confirmed to tax crypto gains but has not given any specific date as to when.
According to Sapo, a local news outlet, the move was formally endorsed by Secretary of State for Tax Affairs António Mendonça Mendes on May 1. However, neither the date nor the tax rate has been publicly revealed so far.
Sources further divulged that tax would be imposed on investment gains made from cryptocurrencies such as Bitcoin.
But why the complete reversal?
In a parliamentary session, Medina explained his reasoning by referring to countries that “already have systems” in place. He said it doesn’t make sense for an asset that creates capital gains to not be taxed.
Attempting to put out a reassuring tone, the Finance minister stated that the tax would not be too stifling as it is important to create and implement a system that makes taxation “adequate,” but which does not “end up reducing revenue to zero, which is contrary, in fact, to the objective for which it exists.”
In addition to that, Medina admitted that the taxation of cryptocurrency is more complicated than most other assets because “there is no universal definition of cryptocurrencies and crypto-assets.”
Portugal Tax Proposal Would Dissuade Foreign Crypto Investors?
The news comes as a surprise to many as it amounts to overruling the current tax law [ Est. in 2016] that said crypto gains cannot be taxed as it is not a legal tender.
Moreover, it would deal a heavy blow to many Golden Visa seekers.
For those unfamiliar, the highly popular Golden Visa program is a fast-track process for obtaining permanent residence and citizenship for non-EU nationals in Portugal.
On top of that, cryptocurrency transactions were exempted from VAT, as the Iberian nation viewed digital currencies as a form of payment rather than an asset.
It was a win-win situation for both crypto traders and investors. But now it looks like foreign investors would have to wait and watch how Portugal’s proposed tax structure would be laid out.