Crypto Regulations in Portugal 2024

Portugal, one of Europe’s oldest countries, was established in 1143. Lisbon, its vibrant capital, is a hub of tourism and infrastructure, reflecting the country’s advanced economic status. Known for its significant gold and lithium reserves, Portugal is an active exporter and continually embraces new technologies and business opportunities. This progressive attitude helps maintain its position as one of the world’s most powerful economies.

Notably, Portugal’s stance towards cryptocurrency is very positive, making it one of Europe’s most crypto-friendly nations. From liberal tax frameworks to supportive crypto policies, the country offers everything a crypto enthusiast could dream of.

Intrigued? Read on!

1. Crypto Regulation in Portugal: An Overview 

Currently, Portugal does not have a specific regulatory framework for cryptocurrency. The main regulations affecting crypto activities are anti-money laundering (AML) and counter-terrorist financing (CFT) laws, guided by EU standards. The upcoming Markets in Crypto-Asset Regulation (MiCAR), an initiative by the European Securities and Market Authority to establish uniform market rules for crypto-assets across the EU, promises to bring more clarity to Portugal’s crypto regulations.

Portugal has recently begun adapting to EU initiatives like the DLT Pilot Regime, which enables new market opportunities in trading and financial instruments on distributed ledger technology (DLT). Crypto businesses in Portugal must register with Banco de Portugal, which oversees compliance with AML/CFT regulations. Any crypto transaction over 1,000 euros requires adherence to specific formalities, including identification processes. The full implementation of MiCAR is anticipated by the end of this year, although certain areas like sales and promotion will remain somewhat unclear until then.  

1.1. Markets in Crypto-Assets Regulation: A Deeper Look

Effective from June 2023, the Markets in Crypto-Assets Regulation (MiCA) aims to enhance market integrity and financial stability within the EU. It focuses on creating policies for better regulation of the issuance and trading of crypto-assets, mandating transparency, disclosure, authorization, and supervision of transactions. The European Securities and Markets Authority (ESMA) is responsible for its implementation, currently developing technical standards through public consultations. MiCA is expected to be fully enforced by the end of 2024.

2. Crypto Regulation in Portugal: What’s New 

Here are the prime developments that happened this year in the crypto regulation landscape. 

April 24, 2024: Operation Samourai led to the arrest of an American national in the Greater Lisbon area. He was suspected of co-founding the Bitcoin Mixer Samourai Wallet. The platform was allegedly involved in laundering over Euro 100 million.  

April 12, 2024: The Nova SBE Blockchain Club organised the fourth Lisbon Blockchain Conference on April 24. The event explored the impact of blockchain technology on business and economy.

March 26, 2024: Worldcoin faced a temporary ban in Portugal due to data privacy issues.

3. Crypto Taxation Framework in Portugal Explained 

Portugal is popular for its ‘tax-free’ policy. No capital gain taxes or VATs are applicable for individual investors. 

For professional crypto traders or frequent/short-term traders, the scene is slightly different. Since January 1, 2023, a new tax regime has been in place under the Portuguese Personal Income Tax Code. The code categorises crypto income into three distinct categories: Capital Income, Capital Gains, and Self-Employment Income. 

Capital Income means the income from passive crypto investments – for example, the income from staking. This income attracts around 28%. 

Capital Gains apply if you sell crypto held for less than a year. These gains are generally taxed at a flat 28% rate. But, if your taxable income, including these gains, exceeds Euro 78,834, the gains may be subjected to progressive tax rates. These rates range between 14.5% and 53%.  

Self-Employment Income means the income from crypto-related self-employment activities like mining. This also attracts progressive rates between 14.5% and 53%.   

For businesses, the income from crypto operations is taxed as business income. If a business’ gross income from crypto operations was under Euro 200,000 in the previous year, 15% of this income is taxable at progressive rates after deductions. 

A unique aspect of Portugal’s tax regime is the ‘Exit Tax.’ If you cease to be a tax resident, a 28% tax is applied on the difference between the market value and acquisition cost of your crypto assets. This is calculated using the First-In-First-Out (FIFO) method.   

4. Crypto Mining in Portugal: What You Should Know 

Crypto mining is not illegal in Portugal. Cryptocurrency mining in Portugal comes with specific tax rules. 

For individual miners, a 5% fixed presumption of expenses is applied. If you earn Euro 100 from mining, you are taxed on only Euro 95. But if you sell the mined crypto, you are taxed on 85% of the income. 

For businesses, 95% of the gross income from mining is taxable at progressive rates.  

5. Timeline in Crypto Regulation Evolution in Portugal

December 2024: MiCAR is to be fully implemented. 

August 2020: Banco de Portugal released a notice directing registration for virtual asset service providers. 

August 2020: Directive (EU) 2018/843 integrated into Law no. 83/2017, strengthening the country’s money laundering and terrorist financing combat framework. 

April 2020: Digital Transition Action Plan published, promoting digital empowerment, business transformation, and flexible regulations for technology testing.

July 2018: Law no. 38/2018 adopted MiFID II requirements for the sale and promotion of crypto assets.

August 2017: Law no. 83/2017 was established to combat money laundering and terrorist financing. 

2016: Cryptocurrencies ruled not legal tender; therefore untaxable.

Endnote 

Portugal’s progressive crypto regulation framework and favorable tax regime make it a top destination for crypto enthusiasts. Celebrated as Europe’s most crypto-friendly country, the forthcoming implementation of MiCAR promises to further enhance this robust framework, fostering an even more welcoming environment for crypto activities. While some grey areas and tax concerns remain, they are minor compared to other countries in the region.

Addressing these issues could position Portugal as a global leader in the crypto market, assuming a significant role in the Western world.

Also Check Out: Crypto Regulations in Switzerland 2024