With the rapid expansion of the cryptocurrency market, Portugal has adapted its tax legislation to incorporate the taxation of crypto-assets. As of 2024, profits derived from the sale of cryptocurrencies must be reported in personal income tax (IRS) filings.
Historical Context
Until the end of 2022, Portugal had no specific tax regulations governing crypto transactions. However, the State Budget Law for 2023 (Law No. 24-D/2022 of December 30) introduced new tax rules, classifying gains from crypto-assets as taxable income under IRS regulations.
How Are Cryptocurrency Gains Taxed?
Gains from cryptocurrency sales fall under Category G of IRS, which covers capital gains. However, taxpayers may opt to include these earnings in their overall income base if that results in a more favorable tax rate.
Additionally, if cryptocurrency-related earnings result from professional activity, they must be declared as business income under Annex B of the IRS return.
Applicable Tax Rates
The applicable tax rate varies depending on how cryptocurrency transactions are classified:
- Capital Gains: 28% (flat rate) or progressive rates if included in total taxable income.
- Crypto-Related Activities (excluding mining): 15% on earnings.
- Mining Activities: 95% on earnings.
Key Exemptions and Special Cases
Despite the new taxation framework, some exceptions apply:
- NFTs (Non-Fungible Tokens) are not classified as taxable crypto-assets under IRS regulations.
- Crypto holdings for over 365 days: Gains from cryptocurrencies held for more than one year are tax-exempt. For assets acquired before the law’s enactment, the original acquisition date determines the 365-day period.
- Crypto-to-crypto transactions: When one cryptocurrency is exchanged for another, it is considered a mere swap. The acquisition value of the received crypto will match that of the exchanged asset.
Other Tax Considerations
- Cryptocurrency transactions may also be subject to Stamp Duty Tax.
- All crypto earnings must be declared in the tax return for the year following the transaction.
Conclusion
With Portugal’s evolving tax landscape, it is crucial for individuals involved in cryptocurrency transactions to ensure compliance with new IRS requirements. If you trade or invest in crypto-assets, understanding these tax implications can help optimize your tax strategy and avoid penalties.
For personalized tax guidance on cryptocurrency taxation, contact GoalSeek for expert advisory services tailored to your financial situation.
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