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The small Iberian nation is set to reverse a long-standing tax law that excluded crypto gains on the grounds that they are not legal tender.

To the chagrin of many Golden Visa seekers, Portuguese Finance Minister Fernando Medina has confirmed that his country will begin taxing cryptocurrency but has not committed to a date.

The move to start taxing crypto was seconded by Secretary of State for Tax Affairs António Mendonça Mendes on Friday, according to Sapo, a local news outlet.

There is not yet an effective date for the tax to start or a set rate, however. It will be levied on investment gains made from cryptocurrencies like Bitcoin (BTC), the largest crypto by market cap. This would reverse the tax law that was established in 2016 which stated that since crypto is not legal tender, gains cannot be taxed.

Medina said in a working session in parliament that his rationale for the tax came about by comparing Portugal to countries that “already have systems” in place. Additionally, Sapo reported that Medina noted that it doesn’t make sense for an asset that creates capital gains to not be taxed. He said:

“There cannot be gaps that cause there to be capital gains in relation to the transaction of assets that do not have a tax.”

It appears that Medina will not impose a stifling rate of taxation on crypto gains. He explained that it is important to create and implement a system that makes taxation “adequate,” but which does not “end up reducing revenue to zero, which is contrary, in fact, to the objective for which it exists.”

At the Parliamentary working session, Mendes said that taxation of cryptocurrency is more complicated than most other assets because “there is no universal definition of cryptocurrencies and crypto assets.” He continued by stating:

“We are evaluating what regulations [fit] this matter […] so that we can present not a legislative initiative to appear on the front page of a newspaper, but a legislative initiative that truly serves the country in all its dimensions.”

Up until now, Portugal has been seen as a crypto tax haven that offers a permanent residency visa known as the Golden Visa because it grants holders special tax exemptions and a path to citizenship. The Golden Visa program was started as a means of attracting foreign investors. Industry observer Anthony Sassano saw the funny side:

Related: Crypto capital gains one of four key areas for Australian Tax Office

In February, an emigrant to Portugal praised the western Iberian nation for its adoption rate of crypto among merchants and even suggested Bitcoin could become legal tender there one day in an interview with Cointelegraph. However, he may have much to think about now that the tax law regarding crypto is set to be reversed.

One thought on “Portugal to lose crypto tax haven status as state announces gains duties

  1. I made a post about bitcoins halving and what it means,

    Let’s do Ethereum.

    Triple Halvening? What do you mean?

    “The Triple Halvening” is the community name given to the large drop in ETH issuance that will occur once “The Merge” occurs and Ethereum is fully upgraded to the proof-of-stake (PoS) consensus algorithm. “The Triple Halvening” is a play on Bitcoin's “Halvening”. While Bitcoin halves its issuance rate every 4 years, Ethereum will see its issuance rate reduced by roughly 90% at the time of “The Merge”. That's equivalent to *3 Bitcoin “Halvenings” happening at once! Ethereum will experience an issuance reduction in an instant what will take an additional 12 years to be matched on Bitcoin's network.

    Under the current proof-of-work (PoW) model Ethereum issues roughly 13,500 ETH per day — an annual issuance of about 4.3% of the total ETH supply. However, the PoS issuance model is determined based on how much ETH is actively being staked on the network. Current projections predict a drop to between a 0.3% to 0.4% issuance rate when “The Merge” occurs.

    For comparison, Bitcoin currently issues 900 BTC per day — an annual issuance of about 1.7% of the total BTC supply. The next two “Halvenings” will reduce Bitcoin's issuance to approximately 0.8% in 2024 and 0.4% in 2028. With Ethereum’s expected drop in issuance after “The Merge” to between 0.3% – 0.4% it will not be until 2028 that Bitcoin's issuance is again within range of Ethereum's.

    When “The Triple Halvening” is combined with the BASEFEE burn mechanism of EIP-1559 (live as of August 2021) it is projected that Ethereum's issuance will actually become deflationary during periods of high user activity. Thank you Reddit users bob Rossi and decibels for the info

    The Merge.

    Estimated for September 19th 2022.

    This will be the biggest upgrade Ethereum has ever gone through! Let’s hope it all goes smoothly. Happy investing

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