October 10th proved to be an important day for crypto in the EU. At the level of the European Parliament, the landmark MiCA Law won a vote by a landslide while the EU Commission issued a call to monitor the Ethereum blockchain. On the same day, the Portuguese parliament received a draft for 2023’s budget that includes taxes on crypto for retail investors.
Portugal Might Impose Taxes on Crypto in 2023
Until now, Portugal has only taxed gains on cryptocurrency from professional and business activities. In May 2022, the country’s minister of finance, Fernando Medina, confirmed the government’s intent to expand Portugal’s digital assets taxation.
According to the budget draft submitted to the parliament this Monday, the minister’s commitment will likely come to fruition in 2023. The current proposal counts taxes levied on crypto gains as a part of the revenue and specifies an intention to create the conditions for “a specific regime that aims to promote the crypto-economy.”
According to the current draft, the gains from cryptocurrency held for less than a year will be taxed at a 28% rate. Crypto held for longer than 365 days will continue to be exempt. There will also be a 10% tax on the free transfer of digital currencies and a 4% tax on commissions charged by the brokers.
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EU Moves Forward in its Pursuit to Regulate Crypto
As Portugal is moving towards an expansion of its crypto tax regime, the wider EU is also quickly moving forward with creating its own digital assets regulatory framework. Last week, the European Parliament supported a non-binding crypto tax resolution brought forward by MEP Lidia Pereira, and an EU Council approved the text of the so-called MiCA.
Markets in Crypto-Assets (MiCA) represents an important proposed regulation in EU law. It is intended to provide a framework for future legislation and regulations concerning various digital assets when it comes to taxation, marketing, and consumer protection. After its text was approved last week, MiCA came before the Economic and Monetary Affairs Committee of the European Union.
The vote on this regulatory framework ended in its favor by a landslide with 28 votes for, and 1 against. Monday’s results likely mean that MiCA will come before and be passed by the wider European Parliament before the end of 2022.
Later on October 10th, the European Commission put out a call to study DeFi protocols on the ETH network in real-time. The automated supervisory of the Ethereum blockchain will allow researchers to study the activity in the decentralized finance space as it unfolds. This call is likely a part of the larger effort to combat illicit crypto activity and comes just months after the EU’s watchdog sought transaction data for spot trades.
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How high do you think crypto taxes will get in traditionally crypto-friendly Portugal? Let us know in the comments below.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
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