Will Portugal’s 28% cryptocurrency tax proposal affect investors’ sentiment?

Portugal has been one of the appealing destinations for migration among some cryptocurrency investors for reasons that include its zero cryptocurrency taxation. However, the government is looking to introduce a new policy that could chip away the coverage for individuals trading cryptocurrencies in the country. 

Portugal is seeking 28% tax on crypto

On Monday, the Finance Minister of Portugal, Fernando Medina, put forward a draft on taxing cryptocurrency gains held by individual investors in the country. The bill was introduced as part of the nation’s 2023 budget proposal. 

As of today, only cryptocurrency gains from professional and business activities are taxable in Portugal as capital gains. Following the new proposal, however, the government could impose a 28% tax on cryptocurrency gains realized by local investors within a year. Cryptocurrencies held for longer than a year are exempted from being taxed. 

The draft also seeks to tax cryptocurrency transfers and commissions charged by companies in crypto-related activities. Meanwhile, the tax proposal is subject to approval by the Portuguese parliament and would only become effective/law if approved.

The development today comes about five months after the Finance Minister hinted at the nation’s plan to subject cryptocurrency to taxation. “Many countries already have systems, many countries are building their models in relation to this subject, and we will build our own,” Medina said.

Will Portugal’s crypto taxation affect adoption?

Portugal is considered one of the most crypto-friendly jurisdictions in Europe and a tax haven for some investors, especially in Italy and France. Particularly, interest and adoption in cryptocurrencies have risen significantly in Portugal amid its favorable tax regime. 

However, it remains to be seen whether crypto activities in the country will dwindle amid the crypto tax proposal.  

The Indian government made a similar move this year, announcing a 30% tax on profits realized from cryptocurrencies on or after April 2022. Investors were not receptive to the development at first, which affected crypto trading in the country at the initial stage.