Portugal’s policy shift from no crypto taxes to one where levies are charged on cryptocurrencies is set to enter another chapter as policymakers eye short-term crypto asset owners.
The government is planning another form of cryptocurrency taxation that will broaden its existing crypto tax policies.
According to Bloomberg, Portugal’s government is moving forward with plans to tax profits on crypto held by residents for less than a year. This is part of the proposals listed in the country’s budget for 2023. The move will see a 28% levy being imposed on gains earned from crypto held for less than 12 months.
This proposed law will mark a major policy shift for Portugal in terms of crypto taxation. Previously, the country only levied taxes on digital assets earned from professional or business sources. Holding crypto for any length of time did not constitute a taxable event.
Now, anyone who makes a profit on selling crypto that was held for less than a year will be liable to pay taxes. Crypto assets held for longer than a year are still, however, exempted from any tax burden.
Also, the draft budget stated that free crypto transfers will get a 10% tax, while commissions charged by brokers on such transactions will attract a 4% tax. Furthermore, crypto issuance and mining could also be subject to taxable income.
The Portuguese government said the proposed incoming rules followed similar crypto policies in other European nations, which place no taxes on crypto holdings over one year. According to a statement by António Mendonça Mendes, Portugal’s Secretary of State for Tax Affairs:
“It’s a regime that fits into our tax system and also to what is being done in the rest of Europe.”
The proposal is before the country’s Parliament and will need to be approved before it becomes law. The latest development comes shortly after Fernando Medina, Portugal’s Finance Minister, revealed that the country was planning to apply capital gains tax for crypto.
However, the Portuguese Congress later rejected such propositions presented by two political groups.
There has been an increased focus on cryptocurrency taxation in recent times. India imposed a 30% capital gains tax on digital asset holdings and transfers, along with a 1% tax deducted at source (TDS) on all crypto transactions. Cryptocurrency exchanges in the country have, however, suffered a sharp decline in their trading volumes as a result of the harsh crypto policies.
Conversely, South Korea has postponed plans to levy a 20% tax on crypto earnings till 2025.