1. Introduction
Crypto assets have emerged as digital representations of value or rights that can be transferred and stored electronically. While they are often associated with payment systems, their volatile value makes them more popular as investment assets. In Portugal, the taxation framework for crypto assets was introduced in the 2023 State Budget (Law No. 24-D/2022, of December 30), effective January 1, 2023. This article delves into the fiscal concept, taxation, and related regulatory aspects of crypto assets.
2. Fiscal Concept of Crypto Assets
Under Portuguese law, a crypto asset is defined as any digital representation of value or rights that can be transferred or stored electronically using distributed ledger technology (DLT) or similar systems. Non-fungible tokens (NFTs), which represent unique and non-replaceable assets, are excluded from this definition. Examples of crypto assets include:
- Cryptocurrencies: Digital currencies like Bitcoin and Ether used for transactions, speculative purposes, or investments.
- NFTs (Non-Fungible Tokens): Digital representations of unique items such as art, music, or real estate.
- Stablecoins: Digital currencies designed to maintain stability by being pegged to fiat currencies or commodities.
3. Taxation of Crypto Assets
The taxation of crypto assets in Portugal varies based on the nature of the transactions and the entity or individual involved. The primary tax types applicable are IRS (Personal Income Tax), IRC (Corporate Income Tax), Stamp Duty, and IMT (Municipal Tax on Real Estate Transfers).
3.1. IRS (Personal Income Tax)
For individuals, crypto-related income falls under three categories:
- Category B (Business and Professional Income):
- Activities like mining or transaction validation are classified as business activities.
- Taxation under the simplified regime includes 15% of revenues from crypto operations and 95% of revenues from mining activities.
- Under organized accounting, general IRC rules apply, with adjustments for IRS provisions.
- Category E (Capital Income):
- Income from crypto-related operations is subject to a flat tax rate of 28% but can be included in total income for progressive taxation.
- Income is taxed only upon realization, i.e., when converted to fiat currency or other tangible assets.
- Category G (Capital Gains):
- Gains from selling crypto assets held for 365 days or more are exempt from taxation unless they are securities.
- Gains from assets held for less than 365 days are taxed at 28%, with optional inclusion for progressive taxation.
- Losses can be carried forward for up to five years if declared.
3.2. IRC (Corporate Income Tax)
For corporate entities, all income and expenses related to crypto assets must be reflected in the company’s accounts and are subject to IRC rules. Taxable profits include 15% of revenues from crypto operations and 95% from mining activities. Accounting rules must align with the guidance of the Portuguese Accounting Standards Commission (CNC).
3.3. Stamp Duty
- Subject to Stamp Duty:
- Free transfers of crypto assets, such as inheritances or gifts.
- Commissions charged by service providers domiciled in Portugal.
- Tax rates include 10% for free transfers and 4% for service commissions.
- Valuation:
- The taxable value is determined based on market value or official quotes when available.
- The tax authority can adjust the declared value to align with market value if discrepancies arise.
3.4. IMT (Municipal Tax on Real Estate Transfers)
When crypto assets are used as consideration in real estate transactions, their taxable value is determined similarly to Stamp Duty regulations. IMT applies to the real estate value, including any crypto asset used as part of the transaction.
4. Reporting Requirements
Entities providing custody or administration services for crypto assets or operating trading platforms must report all transactions involving Portuguese taxpayers to the tax authorities by the end of January each year.
5. Related Topics and Regulations
- The European regulation “Markets in Crypto Assets (MiCA)” provides a framework for crypto markets across the EU.
- Anti-money laundering measures under Law No. 83/2017 apply to crypto transactions.
- FAQs from the Portuguese Securities Market Commission (CMVM) clarify the regulatory approach to crypto assets.
Conclusion
The fiscal and regulatory framework for crypto assets in Portugal underscores the evolving nature of these digital assets in the financial and tax landscape. Whether for individuals or corporate entities, understanding the rules and compliance obligations is crucial to optimizing tax efficiency and avoiding penalties. For tailored advice, consulting with a tax expert is recommended to navigate this complex domain.
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