Portugal, one of the few countries in Europe where cryptocurrency transactions are not taxable, plans to close loopholes in the legal system that prevent the government from taxing virtual assets.
On Friday, Portuguese Finance Minister Fernando Medina, at a press conference, announced that the government planned to legislate on the matter.
“We are not going to maintain this vacuum”, AFP quoted Medina as saying.
Without committing to a deadline, the Portuguese minister said the government planned to introduce a new law “as soon as possible”. The model adopted by the government would be fair and would ensure that Portugal remained a competitive destination, he said.
According to the law that came into force after a decision by the tax authorities in 2016, Portugal does not consider cryptocurrencies as foreign currencies or financial assets. Therefore, profits from trading crypto are not taxed in the country, making this southern European country a crypto haven.
VAT and capital gains tax are not applicable to individuals for their crypto-asset transactions. The government only taxes business activities that are paid for in digital assets.
As a result, cryptocurrency investments have become very popular, especially in the real estate sector. Earlier this month, the country saw its first apartment sale paid for in bitcoin, with no conversion to euros.
In an unprecedented agreement “in Portugal and in Europe”, the real estate agency Zome negotiated the sale of a three-bedroom house in the city of Braga, worth 110,000 euros ($120,000), for three bitcoins.
Speaking to Coindesk, Susana Duarte, associate partner at Abreu Advogados law firm in Lisbon, said the new policy should include a capital gains tax. Currently, Portugal levies a capital gains tax of 28% on financial transactions. However, the government has not clarified how staking or yield farming will be affected by the new law. She said both individuals and corporations were seeking clarification on the government’s proposal.