The crypto market is still very young, after all, the oldest crypto currency is only 10 years old. It is therefore understandable that the legislators must also adapt to the new developments. Again and again there are new court decisions to regulate the crypto-market. Now Portugal is coming forward.
Portugal is setting itself apart from other European countries, because from now on payments in digital currencies and income from Bitcoin mining are exempt from VAT in Portugal. This was reported by the Portuguese magazine Negocios.
Income in digital currencies is not taxable
From the magazine’s article it is clear that the tax authorities have already made it clear that income in digital currencies such as Bitcoin is not taxable. It was made clear that both remuneration in crypto-currencies and exchange transactions of crypto-currencies are exempt from VAT.
The article refers to a communication from the Portuguese tax authority, which commented on the Bitcoin tax. The communication was in response to a request from a Bitcoin mining company. Payments made in Bitcoin are said to be tax-exempt according to the tax authority. This concerns income derived from mining activities. The notification also states that payments in crypto-currencies are exempt from VAT. The Portuguese tax authority is referring to a ruling of the European Court of Justice from 2015 – so the notification is not entirely new.
Exchange of conventional currencies into crypto-currencies is tax-free
For a list of exchanges offering their service in Portugal, visit https://www.bvl.pt/para-portugal/.
The European Court of Justice ruled that the exchange of conventional currencies in units of the crypto-currency Bitcoin is exempt from VAT. The exchange of digital currencies into fiat currencies was also a service. The resulting fee is the difference between the purchase and sales price.
- Under certain circumstances, income from digital currencies is also tax-free in this country, but a one-year holding period must be observed.
- If digital currencies are planted for more than a year, no tax is payable on the income from a sale – if you are a private individual.
- Under certain circumstances, tax may be payable if the trades fall below the one-year holding period.
When is one liable to pay tax?
In principle, tax liability arises from exceeding the exemption limit of 599.99 euros. A sale is also defined as exchanging your coins or tokens for other coins/tokens or buying services or goods with your coins. Tax offices currently assume that coins or tokens are economic goods.
If you have received your crypto-currencies as a gift and therefore did not purchase them yourself, the purchase date and the purchase price of the person who made the gift will be used to calculate the 12-month period.
It must be possible to divide the facts into a category
The decisive factor in the tax assessment is that the facts at hand must be classified into one category, as it is not possible to create separate tax laws for individual cases. Consequently, the same tax law must apply to the assessment of the same facts. Laws that apply to Bitcoin must also apply to other coins/token.
In principle, if a profitable sale is made within 12 months of the purchase of crypto-currencies, this must be declared in full to the tax office.