Portugal reverses the crypto taxation policy by introducing a supplementary budget and bill in parliament that will introduce levy taxes on crypto holdings held for less than 12 months.
Portugal shifts its policy from no crypto taxes to ensuring levies are charged on cryptocurrencies in the country. The country plans to enter another chapter as policymakers eye short-term crypto assets tax gains from owners.
The government also plans another form of cryptocurrency taxation. Cryptocurrency taxation will broaden its existing crypto tax policies.
Portugal reverses crypto tax policy
The proposed law marks a major policy shift for Portugal based on crypto taxation. Earlier on, 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. Portugal plans to tax profits on crypto held by residents.
The government claims that it targets the crypto holdings held for less than a year. The initiative forms part of the proposals listed in the country’s budget for 2023.
Portugal aims to see a 28% levy imposed on crypto gains. Currently, anyone who makes a profit from selling crypto will pay taxes. The crypto assets held for longer than a year remain exempted from the tax burden.
Meanwhile, the draft budget states that the crypto transfers will get a 10% tax. Commissions charged by brokers on such transactions will attract a 4% tax. In addition, crypto issuance and mining could also be subject to taxable income.
Portugal claims that the proposed incoming rules followed similar crypto policies in European countries. Other European nations place no taxes on crypto holdings over one year. The secretary of state, Antonio Mendes, affirmed the decision.
Europe’s move to tax crypto
Portugal tabled the proposal before its parliament. The bill will need approval from parliament before being signed into law.
Apparently, Portugal’s Prime Minister cited additional plans to the bill. Fernando Medina revealed that Portugal plans to apply a capital gains tax on crypto. However, the Portuguese Congress shattered the proposition.
Two political groups initially introduced the propositions to Congress.
Recently, cryptocurrency taxation took the stage in most countries. South Korea recently postponed plans to levy a 20% tax on crypto earnings. The country postponed the initiative to 2025.
India also introduced a motion to tax crypto returns. The country imposed a 30% capital gains tax. The capital gains tax targeted all digital asset holdings and transfers. The tax also included a 1% tax deducted at source (TDS) on all crypto transactions.
Crypto exchanges, however, suffered a sharp decline in trading volumes in the country. The harsh policies by the Indian government hit the crypto exchanges quite hard.
Is Portugal staring at a recession?
If the budget passes, Portugal will join other European countries in crypto taxation. Earlier on, Portugal’s tax office deemed crypto gains as nontaxable income. In May 2022, the tax office warned of the end of tax-free days on crypto earnings.
Portugal’s potential tax pivot comes as the country attempts to lower its deficit. The country also plans to combat slow gross domestic product growth.
The budget plan also proposes taxing windfall profits of oil and gas companies. The Portuguese expect only a 1.3% increase in GDP next year. Perhaps Portugal is staring at a possible recession in 2023.
