Cryptocurrencies exempt from VAT and income tax in Portugal

Portugal’s tax authority has confirmed that both trading cryptocurrencies and “digging” them are exempt from VAT. This is further good news for holders of cryptocurrencies in Portugal – these are also exempt from PIT.

Wydobycie i wymiana kryptowalut zwolniona z VAT

According to an August 26 article published by the Portuguese newspaper Jornal de Negocios, the Portuguese tax authority, in an interpretation issued for one of the mines, confirmed that transactions between a “mine” and “miners” are exempt from value-added tax (VAT – in Portugal IVA). It should be noted that the authority’s interpretation is binding for all cryptocurrency-related tax cases pending in Portugal.

The exchange of cryptocurrencies between each other, as well as the exchange of cryptocurrencies for euros, are also exempt from VAT. The authority explains that it has adopted the interpretation of the Court of Justice of the European Union regarding Case C-264/14 Hedqvist, “According to the CJEU’s ruling, the exchange of cryptocurrencies for ‘real’ currency constitutes a paid service without VAT.” Portugal, however, is one of the few countries that have opted out of VAT altogether. For example, the act of exchanging bitcoin for fiat in France may not be subject to VAT, but e.g. mining revenues, payment fees (e.g. BitPay, where usually KIP is exempt from VAT) are services additionally taxed at the standard VAT rate.

PIT exemption for cryptocurrencies

Portugal has also completely abolished income tax (in Portugal IRS) recognizing cryptocurrencies as currency transactions. Income from currency transactions (like capital income), if not a business, is exempt from taxes in Portugal.

Portugal, battling a demographic decline and a significantly weakened economy in recent years, has opted for a series of fiscal reforms designed to bring in Portuguese from other countries (total PIT exemption for 10 years) as well as nomads (exemption from tax beyond that withholding, a flat rate of 20% for income from Portugal – Non-Habitual Resident status).

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