With the delivery of the (Portuguese) State Budget proposal for 2023, new novelties arise that also come accompanied by many doubts. One of the most innovative measures is related to the taxation of cryptoactive assets. The regulation that had been talked about for some time, will find realisation next year.
The State Budget proposes a definition of crypto-assets: “any digital representation of value or rights that can be transferred or stored electronically using distributed ledger or similar technology”.
This concept has a wide scope, so in the concept of cryptoactive, the well-known cryptocurrencies, tokens and NFTs are included.
Initially, crypto-assets were not seen as a means of investment, but as a means of replacing the currency of the physical world. The reality is that it has become the most widely used means of earning significant capital gains in the short and medium term.
Where does the concern in its regulation come from? Several times, especially through the media, Portugal has been dubbed a ” cryptactive’s tax haven” for not having legislation providing for the taxation of this type of currency. The lack of legislation, not being a legislative option, would then be a gap in the law, which harmed the revenues of the State, which lost, at all times, a source of income.
The new legislation, set out in the draft (portuguese) State Budget for 2023, implements the IRS taxation of cryptoactive assets, as well as of financial intermediaries of crypto transactions, which will pay stamp duty. According to the diploma, a rate of 28% will be applied to capital gains on crypto assets for IRS purposes, if they are held for a period of less than one year.
Without prejudice to the option to aggregate income, in which case cryptoactive assets will be subject to the rates set out in article 68 of the CIRS (Personal income tax code), which vary according to income between 14.5% and 48%, the said income will be subject to a tax rate of 28%.
An exception applies to this regulation: similarly to the German tax regime, capital gains on cryptoactive assets held for more than 365 days are exempt from taxation.
Regarding stamp duty, free transfers of cryptoactive assets will be taxed, as well as the commissions charged for intermediating transactions related to them, applying a rate of 4%.
As for business income (under category B), the only intended adaptation is to integrate the various categories, such as staking (a way to earn rewards for holding certain cryptocurrencies) and mining (the name given to the process of validating and including new transactions in the blockchain, a huge public database that records the history of users’ movements), on the simplified or organised accounting regime – that is, consensus mechanisms.
It should also be noted that the proposal establishes new accessory obligations, of a declarative nature, regarding subjects, operations carried out and interventions. Both natural and legal persons, bodies and other entities without legal personality that provide operational or management services with cryptoactive assets on behalf of third parties will now have to report to the Tax and Customs Authority by the end of January, each year.
The proposal is ambitious and may be difficult to implement, due to the fact that Portugal may not be ready for all its implications, namely because the tax administration is not yet prepared. It is therefore expected that a development in this direction will take place in the coming months.
Joana Vaz Silva, Inês Godinho @ DCM | Littler
