In Portugal, cryptocurrency taxation only applies if the income arises from a business or professional activity.
2022/01/25
Overview
Investment in cryptocurrencies has become increasingly common and potentially profitable. However, the Portuguese tax system is based on the principle of typicity, meaning that income is only taxable if the law expressly categorises it as such.
Analysis by income category (IRS)
- Capital income (Category E): Gains from selling or exchanging cryptocurrencies are not treated as “capital income”, because they result from disposing of the asset rather than from returns on holding it.
- Capital gains (Category G): The current tax code defines capital gains with reference to traditional financial instruments (shares, derivatives, securities). As cryptocurrencies do not fit these legal definitions, they are currently not taxed under this category.
- Business and professional income (Category B): This is the only category under which taxation may apply. Income is taxable when the activity qualifies as a “business or professional activity”. The Portuguese Tax Authority (Autoridade Tributária) looks mainly at:
- Habituality: Frequency and regularity of transactions.
- Profit motive: Whether the activity is geared towards generating consistent profit. There is still considerable uncertainty regarding the exact thresholds (volume, value, or frequency) that trigger this classification.
Value Added Tax (VAT)
Simple transactions in cryptocurrencies are not subject to VAT, and the exchange of cryptocurrencies for fiat currency is exempt, as it is treated as a means‑of‑payment transactional.
Tânia Franco | [email protected]