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Cryptoassets: tax effects

Following the changes to cryptoassets resulting from the entry into force of the Portuguese State Budget on January 1, 2023, and for tax purposes, cryptoassets are defined as “any digital representation, any digital representation of value or of rights that can be transferred or stored electronically by means of distributed recording or similar technology”. Non-fungible tokens (NFT) are excluded from this definition.

Taxation can occur on three different categories of income:
– Business and professional income (B);
– Capital gains on securities and real estate (G);
– Capital income (E);

B – Business and professional income: Including the mining or validation of cryptoasset transactions through consensus mechanisms (staking) will be seen as income derived from a commercial and industrial activity when exchanged for fiat currency.

The coefficient of 0.85 will apply to all services provided in the field of cryptoassets, with the exception of mining (coefficient of 0.95). Progressive tax rates of up to 53% will be applied to the taxable amount.

G – Capital gains: A tax exemption will apply to income resulting from the sale of crypto-assets held for 365 days or more. On the other hand, a flat rate of 28% is applicable to gains resulting from the disposal of crypto assets held for less than 365 days. It should be noted that the holding period for cryptoassets for exemption purposes is counted from the date of initial acquisition, even if this is before the new tax regime comes into force on January 1, 2023.

E – Capital income: Covers remuneration received in fiat money from passive investment in cryptoassets that does not involve their permanent transfer (e.g. staking or off-chain delegation, loan of cryptoassets). In these cases, the flat rate of 28% will apply to the gross income received.

In addition, there is an exit tax, according to which a taxpayer who ceases to be a tax resident in Portugal will be deemed to have disposed of the crypto-assets and the capital gains tax will be applied as mentioned above.

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