Cryptocurrencies in Portugal
Portugal’s stance on crypto currency makes it very appealing for crypto traders and investors. Portuguese crypto tax law states that the buying and selling of crypto currency is not subject to VAT. Other than that there are no other specific cryptocurrency regulations in Portugal – for now.
The economy in Portugal is stable and growing
Portugal has been voted one of the top European destinations to live in 2020 with Forbes Magazine placing it as the 3rd safest country in the world. The “Oscars of Tourism”, the World Travel Awards recognise and reward excellence in travel and tourism. This year Portugal won as “Europe’s Leading Destination 2020.
With all the economic activity and tech buzz in Lisbon and Porto, this country is positioning itself as one of the most economically innovative countries in Europe.
Portugal has introduced investment incentives that have helped to attract high net worth individuals and professionals bringing high cultural and economic value to the country.
The two main incentives are the Golden Visa Program which has massively boosted Portugal’s real estate market and the non-habitual tax regime. As a result, the economy and the real estate market have experienced growth which is forecast to continue in the coming years.
Do you have to pay taxes on Bitcoins in UK, US and Portugal?
Taxes on Bitcoin in the UK
Profits from buying and selling Bitcoin and any other crypto assets are subject to UK Capital Gains Tax (CGT) on any gains made. For individual crypto traders (buying and selling with high frequency) income tax may be due on the profits as trading income.
Capital Gains Tax Cryptocurrency
There is a personal CGT allowance every year (6 April to 5 April) which for most crypto investors is sufficient for avoiding any CGT liability.
Any gains in excess of the allowance are charged to CGT at either 10% or 20% depending on other total taxable income in the year the gain arises.
Many individuals will never pay it. And there are a number of ways in which CGT can be reduced or even removed altogether.
Do I need to pay Income Tax and NIC if I am paid in Bitcoin in the UK?
If you receive crypto from your employer as a payment for services performed in the UK, income tax and NIC will apply based on the value of what you receive.
Crypto assets such as Bitcoin are considered ‘readily convertible assets’. Meaning, the primary taxing obligation lies with the employer in a similar way to withholding taxes on a cash salary.
Taxes on Bitcoin in the US.
Cryptocurrencies are classified as property and subject to capital gains taxes. But you only owe taxes when those gains are realised. Similar to trading stocks, you only need to list gains you earn from bitcoin as income when you decide to sell. When you do decide to sell your crypto, if you have owned it for more than a year, you may be liable for long term capital gains tax on your cryptocurrency profit which is determined by your income.
- 0% if you earn up to $40,000 per year
- 5% if you earn up to $441,450
- 20% if you earn more than that.
All profits, no matter how small, on the sale of Bitcoin need to be reported to the IRS.
Taxes on Bitcoin in Portugal
Crypto transactions are exempt from any VAT in Portugal which means that Portugal is viewing cryptocurrencies as a means of payment rather than an asset. The currency in Portugal is the Euro but you can be paid in crypto currency and pay for goods in Portugal using visa cryptocurrency (crypto visa cards) – it’s a win win for crypto traders and investors.
Tax on Cryptocurrency Gains in Portugal
Gains made from the purchase and sale of cryptocurrency are not taxed, as is the same with any other currency. However, companies which offer services relating to cryptocurrencies are taxed on capital gains, on a sliding scale between 28% and 35%.
Crypto traders need to consider carefully whether their activities would be considered professional income or not. The general rule worldwide is that if trading is your main source of income and you are opening and closing positions on a daily basis you would most likely classify as a professional trader and your income will fall in this category – therefore not being tax-free.
A number of factors determine whether trading activity is professional or not. These include:
- Number of trades per day/week/month/year.
- Holding period of financial products
- Complexity of traded financial products
- Number of trading platforms used
- Debt-to-equity ratio, credit financing
- Profit level and relationship to other income
- Additional relevant trading activities (such as advice)
- Traders’ main activity (where else do you get your money from?)
The fact that one of the factors listed above applies to you does not automatically make you a professional trader.
Ultimately every individual’s overall situation needs to be analysed by an expat tax specialist experienced in crypto trading and investments.
Portugal Golden Visa and crypto currency
Nationals from outside of the EU can obtain citizenship through investment with Portugal’s Golden Visa program.
This program provides residency and citizenship in Portugal without investors needing to relocate.
The Golden Visa program has a ‘stay requirement’ of just 7 days a year.
This is alluring for cryptocurrency traders who are looking to future proof the security of their investment against imminent new regulations in their home countries.
At RHJ Accountants we assist investors looking to apply for the program with tax planning and Golden Visa applications and have helped many crypto currency traders.
Portugal NHR Regime and crypto currency
Crypto traders and Investors in Portugal who have not been tax residents in the country for the previous 5 years can benefit from the non-habitual tax regime. Under the NHR, investors may be able to monetise their personal cryptocurrency earnings in Portugal, without being taxed.
If you would like to find out more about the NHR regime in Portugal and if you are eligible for tax exemptions or reductions – contact us today.
What services or products can you pay for using Cryptocurrency in Portugal
There are a number of different places in Portugal where you can withdraw bitcoin and other cryptocurrencies, including 3 bitcoin “ATMs” in Lisbon.
Cryptocurrency payment for services in Portugal
There has been a recent growth in businesses dealing with cryptocurrency in Portugal, one of which is trust, which enables cryptocurrency payments for businesses.
The most ‘crypto friendly’ bank in Portugal right now is Santander. All banks in Portugal are meant to accept Bitcoin, some have recently blocked transactions of Bitcoin and other Crypto currencies – Millennium BCP and Activobank.
Revolut is another option for those looking for Bitcoin banking.
Visa Cryptocurrency and purchasing crypto in Portugal
‘Visa Inc said on Monday it will allow the use of the cryptocurrency USD Coin to settle transactions on its payment network, the latest sign of growing acceptance of digital currencies by the mainstream financial industry.’ – Reuters
This takes out the need to convert digital coins into traditional money in order for the transaction to be settled.
If you have purchased cryptocurrency on Coinbase you can apply for a Coinbase Visa card and spend funds directly from your wallet.
Coinbase and eToro are two of the most popular Bitcoin exchanges in Portugal. Coinbase is the most popular Bitcoin exchange in Portugal with 43,000,000 users. eToro is the most user friendly as it allows buying and selling Bitcoin with 9 forms of payment.
Portugal has made it clear that it is – at least for now – a tax-friendly home for those who buy and sell cryptocurrency. This is why many of the big crypto players in the crypto community are now based in Portugal….and more are flooding in.
We think you will agree with us when we say Portugal is the ‘perfect plan’ for crypto investors.
If you would like to find out more how to invest and move to Portugal, get in touch with one of our experts here.