UPDATE: The Portuguese government is now tabling plans to start taxing cryptocurrency income. Proposed changes will be presented in the October 2022 budget. We’re not sure when any changes would come into force, but will monitor the situation and update this article as needed.
Cryptocurrency has exploded in popularity in recent years, thanks to dramatic gains in value, especially of Bitcoin and Ethereum.
Even parody coins like Dogecoin have had their moment in the spotlight. But although everyone’s talking about cryptocurrency itself, not many are talking about cryptocurrency tax.
In this article, we’ll examine cryptocurrency tax in Portugal, and how you can use your Portugal tax residency to optimize your financial situation with crypto.
Cryptocurrency tax laws around the world
In countries like the US and UK, tax authorities have soon wised up to cryptocurrency and have implemented new crypto tax laws.
When you sell or trade your crypto, you’re likely to face substantial tax implications, depending on your country of tax residence.
Those who are new to cryptocurrency investing or trading often don’t understand how their assets are taxed. This can lead to significant trouble later down the line, with large tax bills and administrative headaches (like calculating all gains and losses on numerous exchanges).
In the US, cryptocurrency is generally treated as property and taxed in the same way, i.e. capital gains. If you buy one bitcoin for $20,000, then sell it six months later for $50,000, you’ll be taxed on $30,000 worth of gains.
The UK has a similar set up, in which anyone who holds crypto as a personal investment will be taxed on their profits. However, the UK has a capital gains tax-free allowance amount (currently £12,300), so you’d only have to pay tax on any gains over that (excluding any other capital gains liability you may have).
These rules only apply to individuals who are tax resident in the US or the UK. Many other countries have implemented similar taxation rules for cryptocurrency.
But Portugal is an exception.
The following points apply to individuals who are tax resident in Portugal, which means they must declare their worldwide income to Portugal every year.
How does Portugal tax crypto gains?
According to the Portuguese tax authorities, an individual’s profit from the sale or exchange of cryptocurrencies is currently not taxable.
Cryptocurrency income could fall into several Portuguese taxation categories: category E (investment income), or category G (capital gains).
At present, Portugal doesn’t consider cryptocurrency to be legal tender. But the tax authorities recognize that cryptocurrency can be exchanged for real currency.
So Portugal won’t tax you on cryptocurrency profits as long as they don’t come from your professional or business activities.
The latter is an important point, especially if you’re a day trader. If you trade cryptocurrencies on a regular basis, then Portugal may consider it a taxable activity.
In that case, you’d be liable to pay tax in Portugal, under category B (business and professional income). That would be taxed under Portugal’s progressive tax scale, which goes up to 48%.
Portugal is a great country in which to be tax resident when you wish to sell some or all of your crypto portfolio. The value doesn’t matter; all gains are currently tax-free.
But, if your main job involves trading cryptocurrency, then you’re likely to be taxed. In that situation, you should seek advice from a qualified Portuguese tax advisor.
How does Portugal tax cryptocurrency under NHR?
Having NHR status doesn’t affect how Portugal treats cryptocurrency tax. Portugal’s current tax-free status for gains on cryptocurrency sales is irrelevant to NHR.
For those who are liable for category B tax on their crypto trading income, having NHR won’t make a difference. That’s because Portugal doesn’t class trading cryptocurrency as a high value-added activity.
If your income falls into category B, you’ll be taxed at Portugal’s standard progressive rates. These vary from 14.5% to 48% for the 2021 tax year.
What if I have my salary paid in cryptocurrency?
As an individual who is tax resident in Portugal, you won’t be taxed on your salary if it’s paid in cryptocurrency.
What if I own a company that holds cryptocurrency?
Portugal’s tax treatment of cryptocurrency for companies is very different from that of individuals. If you have a Portuguese-registered company that holds cryptocurrencies, then the company must pay capital gains tax on all profits.
Cryptocurrency tax and the Golden Visa
Golden Visa holders can maintain their residency status without becoming tax resident in Portugal. However, if you have significant cryptocurrency holdings and wish to cash out, it may be worth becoming tax resident.
That decision will depend on how your existing country of tax residency treats cryptocurrency profits. To become tax resident in Portugal, you will need to have a NIF (tax number), spend at least 183 days per year physically in-country, and register a Portuguese address with the tax authorities (Finanças).
Conclusion: Cryptocurrency tax in Portugal
- At present, you won’t pay tax in Portugal on your cryptocurrency gains
- But Portugal is likely to tax you if you’re a day trader
- Portugal won’t tax your salary if it’s paid in crypto
- Golden Visa holders with crypto to cash out should consider becoming Portugal tax resident