If you want to avoid crypto-taxes, Portugal is one of the best countries to work in since crypto profits are tax-free since 2018. Trading cryptos is also not considered investment income.
If you’re not a business entity, your crypto is additionally exempt from VAT and tax in Portugal. So for the overwhelming majority of investors, Portugal is crypto tax-free and slowly attracting talent and investment across the crypto sector.
The Portuguese congress, the Assembleia da Republica, has rejected two bills that would have imposed a tax on cryptocurrencies showing positive regulations in the crypto space ahead.
Portugal has long been considered a cryptocurrency tax haven, and therefore the trading of cryptocurrency and holdings has been tax-free since 2018. Additionally, trading digital assets aren’t considered investment income in Lisbon(Portugal). As a result, the city attracts young talent in the crypto and web 3.0 sectors, despite the fact that companies that accept Bitcoin and cryptocurrencies must pay taxes.
The Portuguese Minister of Finance, Fernando Medina, had recently declared that cryptocurrencies within the country will soon be subject to capital gains taxes. However, two separate bills from minor political parties to tax cryptocurrency assets were rejected by the Portuguese Assembleia da República.
New world leaders are beginning to recognize the role and impact of blockchain technology in driving foreign direct investment within a country and bringing transparency across diverse sectors. As a result of excessive taxation, talent will leave the country in favor of countries with progressive cryptocurrency regulations, which are tax-free.
Although the crypto industry seems to be large, it is still nascent and any country should not impose a high tax on financial gains, since Portugal’s government seems to be crypto-friendly, sending a powerful message to all governments throughout the world. As a result, it has become a private favorite among developers looking for a rustic setting with a good regulatory environment and a low tax rate for this new technology.
Crypto transactions aren’t subject to capital gains taxes or other taxes. As compared, the present capital gains rate for financial investment is 28%. The country’s Deputy Finance and Tax Minister Antonio Mendes stated during the session of parliament that taxing cryptocurrency could be a “complex reality,” and capital gains might not be enough.
Portugal has a fairly high adoption rate of Bitcoin and other cryptocurrencies among merchants, and favorable conditions can result in Bitcoin becoming the country’s legal currency if the government continues to embrace it.
Portugal is ramping up to become a powerful competitor with other nations, the cryptocurrency capital of the planet, attracting the developer community to build on this new blockchain technology. Web 3.0 startups and cryptocurrency exchanges are aiming to migrate to countries or regions which favor a sound regulatory environment for cryptocurrencies. While the Portugal government plans to tax cryptocurrencies, the rates are going to be competitive.
Attracting Foreign Direct Investment: Cryptocurrency entrepreneurs are always on the hunt for better opportunities since they earn in crypto, and heavy taxes like 25-30% are problematic since they must keep records and, as a result, will lose revenue.
Consequently, cryptocurrency investors and entrepreneurs will be discouraged from moving to places like Portugal or the UAE if high taxes were implemented. Additionally, these developers work for multiple ventures as freelancers and are likely to be taxed heavily.
An analysis by Galaxy Digital Research, a financial services company based in New York, reveals that venture capitalists invested $10 billion in crypto startups in the 1st quarter of 2022. The VC funds will follow these developer communities and startups wherever they go.
A buyer completed the acquisition of a two-bedroom apartment in Braga for 3 bitcoins (about $116,000), and Portugal relaxed its laws toward cryptocurrencies and is now promoting payments with tokens altogether. By taking advantage of these initiatives, countries like Russia can avoid sanctions by using cryptocurrencies to buy properties directly.
In Portugal, it is the government, regulators, as well as the crypto ecosystem’s responsibility to ensure crypto is not used for illicit purposes, and they collaborate with regulators and law enforcement on the prevention of money laundering and criminal activity. Even so, crypto offers a high level of anonymity. Many countries with no tax on crypto, like Portugal, need tighter oversight to snuff out any loopholes that could be used to circumvent sanctions.
The Portugal government should also show “strong commitment” to working with FATF (Financial Action Task Force) on areas for improvement in its anti-money laundering and counter-terrorism financing regime meanwhile making a favorable regulatory framework for the blockchain industry.