Portugal Set To Prepare Crypto Tax Rules Contrary To Crypto Tax Haven Perceptions

The rise in crypto adoption has brought taxation, sometimes even before the government forms clear rules to protect users in the space. Long regarded as one of the last crypto tax havens in Europe, Portugal is on the brink of shedding the label as the government prepares a tax framework for the asset class.

Portugal Puts An End To Crypto Tax Haven Narrative

Fernando Medina, Portugal’s new Minister of Finance, has confirmed that the country is working on plans to create a taxation framework for cryptocurrencies, according to a report from Portugal.com. Speaking to members of parliament on Friday, Medina said, “many countries already have systems, many countries are building their models in relation to this subject and we will build our own.”

It is worth noting that currently, the European nation collects no tax on crypto holdings or transactions. This is because Portugal views cryptocurrencies as currencies, not assets. However, businesses that provide digital asset services have gains subject to tax within 28% to 35%.

While several crypto enthusiasts have moved to Portugal to enjoy the tax exemptions and holiday weather, several experts had predicted the present tax regime would not last. In the past, pundits have pointed out that the lack of crypto taxation was not part of any worked-out plan to entice investors but simply a legal vacuum.

Aside from the fact above, there have been both internal and external agitations for crypto taxation, which meant it was only a matter of time. Notably, even if parliament did not yield to internal voices calling for crypto taxation, they would have likely come in EU regulations, with the likes of ECB executive board member Fabio Panetta calling for high taxes on the nascent market in April, citing high environmental risks.

While Portugal’s parliament is yet to work out the details of the proposed tax framework, Mendonça Mendes, the Secretary of State for Fiscal Issues, has revealed that the government would also introduce VAT and Stamp duty Tax with a tax on capital gains. Mendes also said, “We are evaluating by comparing internationally what is the definition of crypto assets, which includes cryptocurrencies. We are evaluating the regulations in this area, be it in the fight against money laundering and the regulation of markets, to present a legislative initiative that truly serves a country in all aspects, not a legislative initiative that makes the front cover of a paper.”

Arguments Against Crypto Taxation

As crypto tax laws are springing up in various countries, several crypto enthusiasts have opined that the taxation of the market is myopic. Usually, those opposed to crypto taxation argue that the blockchain industry still creates economic value for countries through labor employment and taxes on digital service companies even without the taxation of crypto holdings.

Moreover, there are fears that excessive taxation could also stifle innovation in the industry and lead to an exodus of talent. As previously reported by ZyCrypto, since implementing its 30% tax on crypto capital gains, India has seen a decline in crypto trading volumes even as crypto firms plot moves abroad.