Crypto assets have gained increasing relevance in recent years, both as a form of investment and as a means of transaction. In Portugal, the issue of taxation of these assets is a topic of interest to both investors and tax authorities.

If until 2022 Portugal was seen as a "crypto-friendly" country, since there was a total lack of regulation, the truth is that as of 2023 this has changed.

The State Budget Law for 2023 established the taxation of income derived from crypto assets, so in this article we will discuss the main issues relating to their taxation in Portugal.

In general terms, crypto assets are treated as financial instruments in Portugal, subject to taxation along the lines of the legislation applicable to other financial assets.

We can categorise this income into three IRS categories, namely Category E or capital income, Category G or asset increases and Category B or professional income.

Thus, gains obtained from trading crypto assets can be taxed as capital gains, subject to an autonomous rate of 28 per cent, and can be included and in this case subject to the progressive rate of personal income tax (IRS), which can vary between 14.5 per cent and 48 per cent, depending on the total amount of the gains and the taxpayer's other sources of income.

However, according to the experience we've had accompanying our clients, there are some particularities to consider. Firstly, it is important to determine when the taxable gain occurs.

The criterion adopted to determine what to tax is known as "FiFo" or "First in First Out", which means that the first cryptocurrency transactions that enter the portfolio or wallet will always be taxable.

In addition, it is necessary to consider the way in which transactions with crypto assets are carried out. In Portugal, current legislation does not provide specific guidelines on how to declare transactions with crypto assets, so it is always best to consult an expert who can help you with your specific case.

Another relevant issue concerns the taxation of cryptocurrency mining transactions. The AT considers that income obtained from cryptocurrency mining is taxed as business and professional income, subject to progressive IRS rates, as well as Social Security contributions.

In conclusion, the taxation of crypto assets in Portugal follows the general guidelines applicable to other financial instruments. However, given their specific nature, it is important for taxpayers to be aware of the guidelines issued by the AT and seek appropriate advice to ensure compliance with the tax obligations applicable to their transactions with crypto assets, so you can count on the experience of the Tax Law Department of Belzuz Abogados, S.L.P. in Portugal for the correct framework and advice on complying with your tax obligations.

 Miguel Paixão

Departamento Direito Fiscal e Tributário | Portugal

Belzuz Abogados SLP

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