Taxation of Cryptocurrency | Budget Law for 2023
Author: Maria Manuel Lopes (Consultora Fiscal)
The Budget Law for 2023 includes a new tax regime for crypto assets, with the most significant changes occurring at the level of Personal Income Tax (“PIT”). There were also changes at the level of Corporate Income Tax, Stamp Duty and, lastly, Municipal Property Transfer Tax.
Under the Budget Law approved by the Parliament, in force since the 1st of January 2023, income deriving from crypto assets may fall into three different categories of income, for PIT purposes. Please see below a brief description of the new PIT regime for the taxation of crypto assets.
Definition of crypto asset
A definition of crypto asset is introduced in the PIT legislation, which is in line with the European legislation (MICA), considering as such, any digital representation of value or rights which may be transferred or stored electronically, using distributed ledger technology or similar technology. For PIT purposes, unique and non-fungible crypto assets (NTF) are excluded from the new regime.
Business and Professional Income
Income deriving from operations related to the issuance of crypto assets, including mining and the confirmation of transactions through consensus-taking processes, will be subject to taxation as business and professional income.
Under the simplified taxation regime, applicable to a total gross income lower than EUR 200,000 / year, the taxable income will be calculated by applying a coefficient of 0.95 over the gross income deriving from mining activities and a coefficient of 0.15 over the gross income deriving from other activities (in this latter case, the maximum effective tax rate is circa 8%).
Investment income
Any form of remuneration of crypto assets will qualify as an investment income, subject to a 28% flat rate (the taxpayer may opt to subject this income to the progressive tax rates). If the remuneration is paid in the form of additional crypto assets, it will only be subject to taxation at the date of the disposal of those additional crypto assets, under the rules of the capital gains regime.
Capital Gains
Gains from the disposal of crypto assets that do not qualify as securities are subject to a flat rate of 28% (the taxpayer may opt to subject these gains to the progressive tax rates).
Capital gains from the disposal of crypto assets held for 365 days or more will be tax exempt – considered for this purpose the crypto assets acquired before the 1st of January 2023. The holding period for crypto assets acquired prior to 2023 is taken into consideration.
Operations where the investor receives other crypto assets as a consideration of the transfer of the disposed crypto assets are not subject to taxation at that moment. Taxation will occur when the investor trades crypto assets for a FIAT currency. At that moment, the capital gain corresponds to the positive difference between the ultimate sale price (FIAT currency) and the acquisition cost of the original crypto assets.
An exit tax regime is introduced, for investors that still hold non-taxed crypto assets on the date they leave Portugal.
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