low taxation and an open debate

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in 2017 the Taihuttus, a large family from the Netherlands decided to cut to the chase and trust in the hands of cryptocurrencies. They sold what they had and exchanged it for bitcoins. It was a risky move, but it did not turn out badly for them. At that time, the cryptocurrency was worth 900 dollars. Today it is around 41,000. Now, and after a journey that has taken them to 40 different countries, the Taihuttu have decided to put down roots in Portugal. Why? Our Iberian neighbor enjoys enviable coastlines, cuisine and quality of life, but what has attracted them are the advantages for “crypto-millionaires”.

In fact, there are already those who point to Portugal as the “Europe’s ultimate crypto tax haven”.

Reasons are not lacking, of course.

Advantageous conditions. “In Portugal you don’t pay any capital gains tax or anything like that with cryptocurrencies. It’s a beautiful bitcoin sky.” explained recently Didi Taihuttu, the family patriarch. As they are not technically considered “currencies” or “financial assets”, their yields do not end up included in capital or financial gains. In other words, the country does not tax the profits generated from the sale of cryptocurrencies, which offers an attractive profile for the likes of the Taihuttu.

Portugal thus differs from other countries, such as the US, which treats virtual currency as property and applies a tax system similar to that of shares or real estate. In the Portuguese country it is approached as a form of payment, which -points out Shehan Chandrasekera, director of the specialized software company CoinTracker, to CNBC— implies advantages. “Capital gains resulting from cryptocurrency transactions, such as cashing out and trading between cryptocurrencies, are not subject to personal income tax.”

The future of money will be digital.  But only when states and central banks allow it

Advantages yes, but no open bar. Although, as Chandrasekera openly acknowledges, the conditions in Portugal make it a “really attractive country for cryptocurrency users to live in”, not everything is open bar. After acknowledging that Portugal is one of the most interesting countries when it comes to the taxation of cryptocurrencies, the Relocated&Save consultancy warns that there are certain operations that are taxed for citizens who are under the non-habitual resident regime (Non-habitual residential regime) in Portugal.

Specifically, depending on who has the cryptocurrencies —whether it is a “crypto trader” or a “holder”— and the activity they carry out, the income may be subject to tax. The clearest case would be that of professionals who are dedicated to the usual trading (“crypto trader”) of currencies or the field of NFTs, who can see how the Portuguese administration considers their profits business income and, consequently, end up taxed at 20%.

the fine print. Taihuttu himself acknowledges that the advantages that have brought him to the Portuguese country might not be so attractive if he were dedicating himself to other activities. “If you earn cryptocurrencies providing services in Portugal, you have to pay taxes on those cryptocurrencies, but I don’t earn anything, at the moment, in Portugal. So for me, it’s a 0% tax,” says the Dutchman.

Another of the advantages of the Portuguese state, slides, is that it allows them to maintain their status as a nomadic family, without actually settling in the country. “We don’t need to be there and that’s the beautiful part. There is no minimum requirement to stay one day in Portugal”.

One of the biggest bitcoin heists in history: 3.6 billion euros in a single bank account

The regulation debate, on the table. The conditions that Portugal offers to the large owners of cryptocurrencies have already led some to point it out as “tax haven” of crypto assets in Europe. A label that is not exempt from debate in the country itself. On an article published this month on Publicone of the most widely read newspapers in the country, columnist Sérgio Guerrero advocated the “urgency” of legislating the earnings of cryptocurrencies so that they are similar, in fiscal terms, to other financial ones registered in the country.

“Portugal continues today without taxing the profits from cryptocurrencies, while Spain and France already have legislation in this regard,” censures Guerrero, who points to the “legal vacuum” that exists in the Portuguese country and trusts that the debate be addressed in the new legislature. Whether or not it finally happens, the truth is that the issue has not been among the burning points of the last electoral campaign, which only a few weeks ago held parliamentary elections in which the most voted candidate was António Costa, who has been prime minister since 2015.

opinion division. Of the nine parties with parliamentary seats that participated in the elections, four, in any case, addressed the phenomenon of crypto assets in their programs. The positions range from the suspicion of the Left Bloc or the Liberal Initiative, which point out the lack of regulation and the instability and risks that cryptocurrencies represent, to the more restrained position of the PSD or the Social Democrats. Beyond their positions, the programs are an indicator that the possibility of a new regulatory system is already on the table.

The question that arises is: Has Portugal arrived at the current situation deliberately? As Cointelegraph points outthe truth is that the favorable situation enjoyed by cryptocurrencies in the neighboring country dates back to a regulation approved six years ago and its position has not changed much since then, which indicates, at least, that it has preserved the scenario.

“Although several years have passed, and with the evolution that has occurred in the sector, the position of the Treasury has not changed since 2016, when binding information clarified that income with cryptocurrencies cannot be classified as capital gains (increases in capital), nor as income from capital”, points out the analyst André Gouveia in Protest Invest.

The Bank of Spain has already recognized its first cryptocurrency platform.  It's just the beginning

The international context. Apart from Portugal, the future and regulation of cryptocurrencies generates debate at the international level. In 2020 the OECD issued a report in which he advises countries to strengthen their tax policies on cryptocurrencies and the authorities have already warned of the risk that they can be used for illicit purposes, such as money laundering or terrorist financing. The Bank of Portugal itself has published similar warnings.

Cover Image | Policarpo Brito (Unsplash)

in 2017 the Taihuttus, a large family from the Netherlands decided to cut to the chase and trust in the…

in 2017 the Taihuttus, a large family from the Netherlands decided to cut to the chase and trust in the…

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