The 2023 State Budget Proposal: Taxation of crypto assets related income

Maria Câncio | Lawyer

The 2023 State Budget Proposal includes new provisions regarding the taxation of crypto assets related income.

Currently, the Portuguese tax system only taxes professional gains from the sale of cryptocurrencies, meaning they are only taxable if the sale is related to a professional trading activity but does not tax sporadic gains obtained by individuals with cryptocurrencies and in fact is consistently portrayed as a crypto friendly country.



If the Proposal is approved, Portugal will no longer be one of the last countries in the world to give crypto assets related gains a very favorable tax-treatment, but it will continue, nonetheless, to be attractive for crypto investors.

Personal Income Tax (“PIT”)

• Operations related to the issuance of crypto assets or the validation of crypto-asset transactions

The Proposal outlines that operations related to the issuance of cryptocurrencies (including mining) or the validation of cryptocurrency transactions through consensus mechanisms are qualified as commercial activities.

If this measure is approved, the income that arises from the above-mentioned activities will be qualified as business and professional income and included and taxed as Category B income for PIT purposes.

In order to determine the taxable income deriving from these activities under the simplified taxation regime (the regime applicable to IRS taxpayers who, in the exercise of their activity, have not exceeded in the previous fiscal year a gross annual amount of Category B income of €200,000), a 0.15 coefficient is applied to the income. Therefore, in practical terms, if this measure is approved only 15% of the income earned by the taxpayer covered by simplified taxation, with crypto active issuing activities and transaction validation activities will be subject to general progressive PIT rates (it will not be possible to deduct expenses).

For taxpayers who have an organized accounting system (who register an annual gross income higher than €200.000), the taxable base will include the total amount earned, minus the costs.

• Onerous disposal of crypto assets

The Proposal foresees that gains obtained from operations related to the onerous disposal of crypto assets are qualified as capital gains and, consequently, taxed as Category G income under the PIT Code.

However, the Proposal refers to two different taxation regimes, depending on the holding period of the sold crypto assets:

• The balance between capital gains and losses, resulting from operations involving the disposal of crypto assets held for less than 365 days, are taxed at the special rate of 28% (without prejudice to the option of aggregation).
• Crypto assets held for more than 365 days, it proposes an exemption from taxation and, for the purposes of counting the holding period of crypto assets, it will include the crypto assets acquired before the 1st of January, 2023.

Corporate Income Tax (“CIT”)

For companies who have not exceeded an annual gross income in the previous fiscal year of €200,000, the Proposal aims to add a simplified regime in the CIT Code for crypto assets related income not qualified as capital gains, subjecting it to a coefficient of 0.15.

Thus, in practical terms, if this measure is approved, only 15% of the income earned by the taxable person from activities of issuing crypto assets and validating of cryptocurrency transactions will be taxed.

Stamp Duty treatment

In the case of gifts or inheritances of crypto assets, the Proposal wants to enforce a 10% tax rate on transfers when such crypto assets are deposited in entities with registered office, effective management or permanent establishment in Portugal and, if not deposited in Portugal, when the deceased was domiciled in Portugal or the beneficiary of such gifts/inheritances is domiciled in Portugal.

Stamp Duty will also be levied on commissions charged in the intermediation of transactions related to crypto assets, at a 4% tax rate.

Reporting obligations

Natural or legal persons, bodies and other entities without legal personality that provide custody and administration services for crypto assets on behalf of third parties or manage one or more crypto-asset trading platforms are required to submit an official form to the Portuguese Tax Authorities, until the end of January of each year, communicating the operations carried out with its intervention relating to crypto assets. It is also proposed that, when the service provider is outside Portugal, the person who must pay the tax is the intermediary in Portugal or, if there is no intermediary, the service provider will appoint a representative.

If you have further questions regarding this matter, get in touch with us and we will be delighted to assist you.