Portugal: A Crypto-Friendly Country for Digital Nomads
Did you know that cryptocurrency is tax-free in Portugal? The country has announced several incentives over the years and today cryptocurrency traders and miners enjoy Portugal’s crypto-friendly environment. Earnings from crypto are exempt from VAT in the country and there’s little legal and regulatory burden on cryptocurrency businesses.
Portugal sets a great example for other European countries in terms of crypto-friendliness. It encourages foreign entrepreneurs, investors, and digital nomads by allowing them to realize tax-free cryptocurrency earnings.
But what makes Portugal one of the most crypto-friendly countries in the world? How did the country transform while most governments still ignore cryptocurrency?
Let’s dig deeper!
Cryptocurrency Is Tax-Free in Portugal
Portugal has always been open to innovation. While it follows the EU guidelines on digital currency regulation, Portuguese authorities have affirmed that the cryptocurrency will be treated the same as any other currency, not just an asset. In 2016, The Ministry of Finance issued a notice stating that retail trades of cryptocurrencies would be non-taxable and that only trades or income generated from professional activities would be taxed.
According to this notice, the earnings from cryptocurrency don’t fit into any income categories such as Category E (Capital Yields), Category G (Capital Gains), or Category B (Self-Employed Worker) under the Portuguese Tax Law. Let’s understand deeply.
Category G: Capital Gains Income refers to the income gained by the sale of a house, shares, or assets. Portuguese Law doesn’t consider cryptocurrency trading as a generator of capital gain. This is why it’s exempt from taxation.
Category E: Dividends and interests fall under this category. As this is not the case with cryptocurrency trading, no tax is applied. However, please note that if you derive income from your investments in crypto interest accounts, you might be required to pay taxes.
Category B: This category refers to the income received from self-employment activity. If your cryptocurrency trading is not frequent and recurring, it can be exempt from this category of tax, as well. But please note that if you trade cryptocurrency as your main line of business to generate income, you’re required to make a declaration and pay taxes on your profits.
We understand it might be confusing to decide if your activity falls under any of these categories. Therefore, we suggest you speak with a tax lawyer first before committing an investment. Feel free to email Melissa for a recommendation.
On the other hand, salaries will be fully taxed like any other currency if paid in crypto. But please note that not many countries allow wages to be paid in crypto. So, Portugal has come a long way in this regard!
Cryptocurrency Regulation in Portugal: No VAT
To clarify the VAT issue on cryptocurrencies, the Court of Justice of the European Union made a declaration in 2015. With this declaration, CJEU stated that traders and investors aren’t subject to VAT when they buy or sell cryptocurrency.
In April 2020, Portugal also approved a “Digital Transitional Action Plan” to encourage digitalization. With this plan, the government declared that it would provide the necessary environment for innovation and digital transformation of businesses. The plan includes the creation of “Technological Free Zones” to encourage experimentation on blockchain and other fields.
All these incentives make Portugal a great place to be in, don’t they?
Non-Habitual Residency Program in Portugal
Portugal is a star when it comes to tax applications for expats. Its Non-Habitual Resident (NHR) program is for non-resident individuals who are looking forward to benefiting from tax policies in Portugal. The program offers reduced tax rates and exemptions on certain taxes to foreign investors and residents.
You can be an NHR too if,
- You’ve not been a tax resident in Portugal in the preceding five years, and
- You have the right to be a Portuguese resident via Portugal Golden Visa program or by being an EEA/EU/Swiss citizen
The NHR allows exemption on most foreign-source incomes, incurs no wealth tax, and offers special treatment on most taxes.
The NHR program doesn’t require you to stay in the country for the whole year. Staying in Portugal only for a minimum of 183 days will suffice. Also, non-habitual residents in Portugal are exempt from paying taxes on their foreign-sourced income in countries that have a double taxation agreement with Portugal. Interested in NHR? Check our NHR ultimate guide and get more insights.
If you’re already familiar with NHR and have questions, don’t hesitate to send us an email. We’ll be happy to introduce you to a tax lawyer…
Cryptocurrency Platforms in Portugal: How To Buy Bitcoin
It is easy to buy Bitcoin and other coins in Portugal. There are some popular platforms that are operating without any limitations in the country. The following are some platforms that you might want to consider:
Please note that this list doesn’t reflect any personal preference and is just based on our search. Before you decide to work with any of them, it’s going to be wise to compare the options.
Cryptocurrency and Blockchain Community in Portugal
There’s a big blockchain community in Portugal. There are hundreds of groups and communities across the country that deal in different cryptocurrencies. You can easily meet them to expand your knowledge and know what’s happening in the Portuguese crypto space.
Here’re some groups as a start:
The Block: This place, serving also as a coworking space, is a famous blockchain community in Lisbon. Here you can meet fellow crypto traders and enjoy being part of a young community.
The Blockchain Center Portugal: Based in Porto, this place aims to bring cryptocurrency enthusiasts together. They empower people to build projects with blockchain technology.
Blockchain Portugal: This group is also based in Lisbon and open to anyone who is interested in cryptocurrency technologies.
After some facts on Portugal’s tax-friendly environment, we believe it might help to give a quick introduction on residency in Portugal. Portugal offers residency by investment via Portuguese Golden Visa program. It’s a way to become a legal resident in Portugal through investment. Check our Portugal Golden Visa ultimate guide to understand the program deeply. It’s been written by our community member Barbara who has first-hand experience with the program.
For any questions you might have, please check the FAQs section below. Please don’t hesitate to send us an email for more information. We’ll be happy to help.
Frequently Asked Questions
Is bitcoin tax-free in Portugal?
Yes, bitcoin is tax-free in Portugal, if buying and selling aren’t done as a main and professional activity.
Are all coins considered tax-free in Portugal?
Yes, if crypto trading isn’t your professional activity.
Do I need to register all assets I bought in my country of origin?
Yes. In Portugal, you’ll need to declare your worldwide income.
Is there a limit on the bitcoin amount to be considered tax-free?
No, there is no limit.
Do I have to move to Portugal to benefit from the tax-free policy?
Yes. Only if you move to Portugal, you can benefit from this policy.
How are crypto staking, lending, mining, and farming taxed in Portugal?
There is no specific treatment so far.
Do I owe my country of origin any tax after selling my cryptocurrency as a Portugal tax resident?
In principle, no
Will bitcoin always be tax-free in Portugal?
Most likely not. But at the moment, bitcoin is tax-free in Portugal.