Portugal will implement 28% tax on crypto in 2023

The Portuguese government will introduce a 28% tax on all earnings generated from crypto held for less than a year in its 2023 budget.

The announcement stated:

“Is intended to create a broad and adequate tax framework applicable to crypto-assets, in terms of taxation of income and property… In this way, it is intended to project the digital transition and exponentiate the 4.0 economy, as vectors of economic development and empowerment of the national labor market in terms of digital skills”

The proposal also suggested implementing a 10% tax on free crypto transactions such as airdrops and another 4% on crypto broker commissions.

Previous legal actions

In May 2022, the Finance Minister of Portugal confirmed that the country would change its crypto-friendly attitude and start taxing crypto. Portugal began looking at other countries and their attitudes toward crypto to see examples that could help the government understand what kind of crypto regulation they want to create.

The Assembly of the Portuguese Republic requested a study on how other countries have dealt with crypto taxation to gain more insights.

In the same month, lawmakers proposed a new bill on crypto taxation. However, their bill got rejected by the legislation. While the details of the bill or the reason for its decline were not disclosed, Portugal’s Secretary of State for Fiscal Issues commented on the rejection and said:

“We are evaluating by comparing internationally what is the definition of crypto assets, which includes cryptocurrencies.”

Three months after, in August, the Finance Minister’s confirmation of the upcoming crypto taxation, banks in Portugal closed certain accounts belonging to crypto exchanges.

Crypto-friendly Portugal

Up until it got a change of heart in May, Portugal was one of the most crypto-friendly countries.

The country perceived crypto as a means of payment rather than an investment tool, which resulted in the country’s zero-tax policy on crypto. In addition to its crypto-adaptive attitude, its mild climate and low cost of living also contributed to the attractiveness of Portugal.

According to estimations, the country’s foreign residents have increased by more than 40%  in the past decade, most being crypto-curious individuals.

To encourage crypto adoption in the country, The Portuguese Central Bank announced in June 2021 that it would reward the first local crypto exchanges that managed to get a license. Portugal has also seen various luxury real estate sold for cryptocurrencies like Dogecoin (DOGE) or Cardano (ADA).