Crypto Taxes

Should I move to Portugal to benefit from lower crypto taxes?

Portugal is constantly mentioned in the news as a crypto-friendly nation and you probably know or heard of someone willing to relocate to Portugal to benefit from low crypto taxes.

Having such good weather, a relatively low cost of living and a safe environment already make this destination a favorite amongst digital nomads, even surpassing Bali.

Portugal also offers a very attractive Non-Habitual Resident regime, applicable to the foreign income of individuals and designed for people wishing to transfer their residence to Portugal.

Is Portugal really a crypto tax free country?

The Portuguese Tax Law currently doesn’t foresee specific regulations for tax residents in Portugal investing in cryptocurrencies. Nevertheless, even as a Portuguese resident, you should be acquainted with the legal specifics before filing your crypto taxes.

The Portuguese Tax and Customs Authority (PTA) has published its position regarding cryptocurrencies taxation in a binding information.

The PTA position on this matter only gives a framework about individual taxation and can change in the future if the PTA changes its opinion or if the law changes.

In the binding rule published, the PTA considers that capital gains resulting from the sale of cryptocurrencies will not be taxable (crypto to fiat, as well as crypto to crypto) under the Personal Income Tax Code, within the scope of category E (dividend and interest income), nor subject to being taxed under category G (as capital gains).

Additionally, the profits obtained from crypto sale are only taxed at a personal level if their regularity ends up constituting a professional or entrepreneurial activity of the taxpayer. In that case the profits will be taxed as a qualifying income under the category B (freelancing) of the Personal Income Tax Code.

In short, the PTA considers that capital gains resulting from the sale of cryptocurrencies are not subject to Personal Income Tax unless it is considered that this activity is the taxpayer’s professional or entrepreneurial activity.

What constitutes a professional activity from a tax point of view?

The criteria for defining what constitutes a professional activity from a tax point of view are not clearly defined by Portuguese law and depend on the PTA analysis. Some common criteria that may indicate professional activity include:

  • high regularity of the activity
  • high economic dependence (in relation to other income)
  • physical space for the activity and workers.

If only one of the factors applies does not mean that the PTA will consider that you conduct a professional activity. This is evaluated on a case by case basis.

How can I be certain of what will be the PTA position regarding my situation?

To avoid uncertainty on decisions, taxpayers in Portugal (or non-residents who wish to relocate) can request a binding ruling from the PTA regarding the application of any tax rule or regime to a certain operation they plan to perform.

The PTA must issue the binding ruling within 150 days (75 days for urgent rulings).

Once the binding ruling is issued, the PTA cannot act differently with respect to the subject matter of the ruling, unless otherwise required by a judicial decision.

The ruling ceases to be binding after four years (unless a renewal is requested). After the first year, it can be revoked without retroactive effects.

Will the Portuguese Tax Law change in the near future regarding the taxation of cryptocurrencies? 

As far as we know, there is no indication for now that there’s a legislative process underway to introduce taxation to cryptocurrencies in Portugal. There has been no public discussion regarding this matter. 

Nevertheless, this doesn’t mean that the Portuguese government will certainly not introduce a law regarding this matter either to tax cryptocurrencies or to clarify that cryptocurrencies are not subject to tax.

If the Portuguese government approves a law that taxes cryptocurrencies, the specifics of how it will affect taxpayers will depend on how the law is designed.

Are other types of income related to cryptocurrencies tax free?

Currently, and as described before, there is only a public position from the PTA regarding the taxation of individuals that sell cryptocurrencies.

Regarding other types of income, such as receiving a salary in crypto, DeFi income, mining income, NFT creators income, NFT trading income, since they aren’t specifically foreseen in the tax law nor is there a public position from the PTA, a case by case analysis is made, based on an interpretation of the current tax framework.

What else should I consider if I am thinking of relocating to Portugal?

For EU citizens

If you are a resident in the EU (in the Schengen area), the requirements for obtaining a visa to Portugal are relatively low.

In this case, Portugal may be an attractive place to relocate to benefit from lower crypto taxes. Especially if your crypto income is related to selling cryptocurrencies as an individual and not as a professional activity. 

As previously mentioned, to reduce uncertainty in this move, you may consider submitting a binding rule to the PTA to have your specific case evaluated before you relocate. 

For countries outside the Schengen area (such as the UK), more difficult requirements for obtaining visa exist (and may depend on specific arrangements between countries).

Do make sure that your country of origin doesn’t have a type of “exit tax” where unrealised capital gains are subject to income tax when you change tax residency. You should also evaluate in your country of origin any risk of double taxation. Please note that Portugal has signed double tax treaties with more than 70 countries, which eliminates double taxation for certain types of income.

For US citizens

The United States is one of the few countries in the world where if you are a US citizen living outside the US, your worldwide income is subject to US income tax, regardless of where you live. Certain foreign earned income exclusions and/or foreign income tax credits may apply. 

This is why some US citizens consider renouncing their citizenship and becoming a citizen in a country with lower taxation.

Portugal has a golden visa program that allows foreigners that invest in the country (through real estate or creating a company) to receive residency in Portugal and visa-free travel in the Schengen area.

Taking into account the complexity associated with relocation as a US citizen, you should consider based on your individual situation.

CoinTaxList crypto taxes europe crypto tax friendly countries

This blog post is provided by CoinTaxList, a database with an overview of crypto taxes of 30 countries worldwide that allows easy comparison between how each country taxes crypto. Use this database to compare between different countries and to find the most crypto tax friendly country to relocate. Get access to the database with a 30% discount here.

ACCOINTING.com offers many more answers on crypto tax reporting.

Refer to the resources in our guide and check out the most accurate crypto tax calculator to help you with filing your crypto taxes.

Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto taxes we recommend contacting a specialist in the specific country.

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