This week we return to our series discussing the status of cryptocurrencies in selected European countries, this time we will briefly describe the changes taking place in this area in Portuguese legislation.

The world of cryptocurrencies, which until now could be described as the Wild West, is becoming increasingly and more closely covered by new legal regulations that are adapting to it, in particular those concerning tax issues related to cryptocurrency transactions.

Recently, we've seen a continuation of this trend in Portugal, where the Portuguese Minister of Finance (Fernando Medina) announced the start of taxation on cryptocurrency transactions. Until now, the situation in Portugal was that cryptocurrencies were treated as a means of payment, not an asset.

The reason for this shift isn't so much a change in views on cryptocurrency taxation, but, to paraphrase a politician at a session of the Portuguese Parliament, it's a slow reaction to the rapidly growing Portuguese cryptocurrency market. There have also been voices raising concerns that cryptocurrency investors earning millions are treated better than ordinary citizens who are required to pay VAT on electricity. Therefore, it's safe to say that Portugal isn't so much exceptionally crypto-friendly as simply slow to adapt, or rather, hasn't adapted at all, its tax system to the changing environment.

We don't know exactly when the change will take place, but we can be certain that it's one of the projects currently being considered by the Portuguese Parliament. Portugal's Fiscal Secretary explains that legal regulations from around the world are currently being evaluated to help draft a law that will not only address taxes but also combat money laundering and terrorism financing, which will, of course, take some time.

Portugal is being supported in this regard by the European Parliament, which is clarifying and unifying the definitions of words that underpin the cryptocurrency world and largely determine whether a given transaction can be taxed or not. The European Parliament's (EP) actions will not only help Portugal but will also enable the unification of cryptocurrency regulations within the EU, something the EP undoubtedly strives for.

Such drastic regulatory changes could lead to equally drastic changes in the number of new cryptocurrency businesses. Furthermore, this could significantly increase the outflow of established investors, making Portugal less attractive. However, as in any such situation, it's advisable to wait until we hear the so-called "specifics" before jumping to conclusions.

As a side note, it's worth mentioning an interesting investor program (applicable to individuals from outside Portugal, the EU, and the European Economic Area) in force in Portugal, namely the so-called "Golden Visa," which grants investors in Portugal numerous privileges, most importantly, Portuguese citizenship. Why do we mention this? There have been some concerns that visa holders may not be covered by the above regulation; time will tell if and how this issue will be resolved.

This alert is for informational purposes only and does not constitute legal advice.

|

|