The finance minister intends to close the gaps in the tax system caused by cryptocurrencies – for capital gains, VAT, and other purposes.
Portugal’s Finance Minister, Fernando Medina, has announced that capital gains taxes will be levied on bitcoin income. Though he has not committed to a precise timetable, he has stated that there must no longer be gaps in the tax system affecting digital assets.
Is the Tax Haven Dead?
In Portugal, cryptocurrencies are now subject to very few tax restrictions, making the country something of a crypto center. However, on Friday, the government finally agreed to create a fiscal framework for these assets, which will cover revenues derived from the sale of Bitcoin, among other things.
Minister Medina stated that when developing its own framework, it will look at similar frameworks currently in place in other countries. He intends to prioritize “fair” and “efficiency,” ensuring that taxation is “appropriate” but not so high that it drives capital out of the region.
“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 said to other deputies.
According to reports, crypto taxation has been on the government’s agenda since March 2021. António Mendonça Mendes, Secretary of State for Tax Affairs at the time, requested a research on how other countries taxed such assets. Due to the dissolution of parliament, however, the dossier was passed onto the next session, which has recently resumed.
Taxing capital gains, according to Mendes, does not go far enough in the crypto world. Shortly after the Finance Minister’s remarks, he stated that the government is also concerned with how digital assets interact with the VAT and Stamp Duty (IS) tax systems.
“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,” he explained.
However, the Secretary of State stated that the most difficult aspect of developing this framework is properly defining cryptocurrencies. For example, the European Union’s Court of Justice and the European Central Bank are now classified differently.
Cryptocurrency is gaining popularity in Portugal.
Portugal’s crypto business is now experiencing steady growth and popularity. Last month, the central bank approved the first financial institution to begin offering cryptocurrency-related services.
In another first, a Portuguese home was acquired directly using Bitcoin earlier this month, without the need for conversion to fiat money. Madeira, a Portuguese island jurisdiction, has even made the principal cryptocurrency de facto legal tender.