Cryptocurrency adoption in Portugal

In Portugal, the popularity of cryptocurrencies is still growing, but it is not surprising if we take into account the very liberal approach to them in terms of legislation. At least it was so until recently. The main tax authority in Portugal saw the potential in cryptocurrencies. In 2019, it was stated that digital trade will be exempt from tax. Licenses for companies dealing with services related to cryptocurrencies have also been introduced. The first company to obtain such a license was the bank Bison Digital Assets. Thanks to this license, the Bank will offer its clients trading in digital assets.

Recently, Finance Minister Fernando Medina announced that the government has plans to impose a tax. The government will create legislation, taking as an example the laws of other countries that have already adopted cryptocurrencies. They will learn from their experiences to create their own law. The idea is to regulate all areas related to cryptocurrencies along with the taxation of profits from their sale. The work on the new regulations is a priority of fairness and efficiency, and taxes are to be “appropriate” so as not to discourage citizens from digital assets. The problem also lies in the appropriate classification of the concept of cryptocurrencies. It is important that these regulations are in some way related to how cryptocurrencies are seen by the European Union, but here there is a divergence. The European Central Bank and the Court of Justice of the EU use two different classifications when adjudicating.

Meanwhile, Portugal, although it does not have many tax regulations regarding cryptocurrencies, is firmly open to them. In addition to the aforementioned growths and adoption, other activities have emerged in this field. One of the regions of Spain, Madeira — decided to introduce Bitcoin as the primary means of payment. Another, quite big surprise, can be called the first-ever real estate purchase transaction using Bitcoin, where the coins were not converted into fiat currency.

By changing the taxation of cryptocurrencies, Portugal may lose its status as the most attractive tax residence in Europe. Earlier decisions were dictated by the demographic decline and the weakening economy, aimed at bringing the Portuguese back home. Thus, it attracted tax nomads, whose outflow may turn out to be severe.