Portugal's Draft Budget To Introduce 28% Tax On Short-Term Crypto Holdings

Portugal, a haven for crypto investors, has decided to tax cryptocurrencies at a rate of 28% on investors holding blockchain-based assets for less than a year. However, assets that are held beyond the one-year period will remain tax-free.

The crypto tax legislature is a part of the 2023 draft budget of Portugal and is pending approval from the Portuguese Parliament, Bloomberg reported.

Investing in cryptocurrencies has been a tax-free activity in Portugal, but this will change once the new draft gets approved. With the imposition of a capital gains tax of 28%, the European country may lose its status as one of the world's most crypto-friendly nations.

"The decision doesn't seem particularly hostile to crypto in and of itself — the tax will be levied only if crypto assets were held for less than a year and the proposed rate is the same as in the case of traditional investment gains," Mikkel Morch, chairman at the digital asset hedge fund ARK36, told International Business Times in an email.

The draft budget will also introduce several other taxes, including a 10% tax on crypto transfers and a 4% rate on commissions from crypto brokerages. Issuing of cryptocurrencies and crypto mining activities will also be considered taxable income under the new draft.

Secretary of State for Tax Affairs António Mendonça Mendes reportedly claimed that this model "fits into our tax system and also to what is being done in the rest of Europe."

Meanwhile, Morch added, "Over the past four years, many individuals and companies moved to Portugal, at least in part, because of the advantageous tax regime. While those may stay for now, attracting a bigger part of the European crypto industry to Portugal may not be as easy anymore."

The move to tax crypto investors is aimed at the establishment of "a specific regime that aims to promote the crypto-economy," the government said, as per Bloomberg.

Moreover, Portugal's draft budget will also raise tax rates for other fields, according to Reuters. The government is raising taxes on oil and gas firms, while workers in low-income brackets will have to pay fewer taxes.