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What taxes on cryptocurrencies are paid in Portugal?

As we explained in previous posts, for tax residents in Portugal the Income Tax is very high and not attractive at all.

However, in 2012 the Portuguese government implemented the so-called non-habitual tax residency (“Non-habitual residential regime” or NHR) that exempts foreigners from paying for income coming from outside Portugal, as we explained in the guide to Portuguese tax residency.

This regime has attracted many cryptocurrency holders to Portugal, as there is a widespread belief that they will not be taxed on them. But, as we will see today, this is not always the case.

In this article we will explain in detail the taxation of cryptocurrencies in Portugal.

Is Portugal a favorable jurisdiction for cryptocurrencies?

More and more often we receive inquiries about whether it is worth moving to Portugal to avoid taxation or to pay less tax on the sale of cryptocurrencies.

The answer is usually yes, because Portugal is one of the most attractive countries in terms of cryptocurrency taxation. For two reasons:

  • The conception that a 2016 “tax ruling” issued by the tax authorities give to cryptocurrencies.
  • The NHR regime, which also allows not being taxed on foreign source income.

Is the sale of cryptocurrencies not taxable in Portugal?

Portugal is one of the few countries that do not tax gains derived from the sale of cryptocurrencies.

This is because the Portuguese tax authority understands that cryptocurrencies cannot, technically, be considered “currencies” or “financial assets” and therefore does not encompass the returns from them within capital gains or financial gains.

This means that, in the absence of a clear and specific regulation on the taxation of cryptocurrencies, Portugal is for the time being a “tax free” destination for the sale of cryptocurrencies. And it seems that this will continue to be the case, since no changes are expected for the new fiscal year.

However, it is worth reviewing some aspects on the taxation of cryptocurrencies for taxpayers who opted for the Portuguese NHR, the regime usually requested by digital nomads or HNWI who move to Portugal to pay less tax.

How are cryptocurrencies taxed under the NHR?

As we were saying, many people think that under the Portuguese NHR regime cryptocurrency operations are never taxed, and this is not always the case for cryptocurrency holders under the Portuguese NHR.

It is essential to analyze the “how”: a large holder of cryptocurrencies or “holder” is not the same as a “crypto trader”. Nor is the treatment of capital gains from the sale of cryptocurrencies the same as those derived from the “farming” of “staking” or NFTs.

In short, under the NHR gains derived from cryptocurrencies will be taxed as:

  • Corporate income: in cases where the taxpayer’s professional activity is the frequent purchase and sale of cryptocurrencies (“crypto trader”) or the artistic activity of the NFT, the profits derived from the sales will be considered business income taxed at 20%.
  • Investment income: cryptocurrency investors who obtain income from foreign exchanges (such as those derived from staking or DeFi) will be exempt if they are taxed in the source state and if the source state has a double taxation avoidance treaty signed by Portugal.
  • Capital gains: the NHR regime is less relevant because most conventions assign full taxation rights to Portugal and therefore the foreign income exemption is likely not applicable. However, as mentioned, gains from trading cryptocurrencies or NFTs that do not go beyond mere private asset management should be outside the current IRPF rules and therefore exempt.

Therefore, taxation will not always be 0%, and may be 20% if the sale of cryptoassets is considered to be done in a professional manner.

What are the main problems encountered by cryptocurrency holders in Portugal?

Relocate&Save users who have moved to Portugal to pay less tax on the sale of their cryptocurrencies have had satisfactory results after a previous analysis of their situation.

However, we have come across many people who have contacted us to change their tax residence from Portugal to another country because they thought they were not going to pay taxes and have ended up paying 20% or even more.

Thus, it is key to take into account the following:

    • Be careful with the NHR application, sometimes it is denied because the person who applies for it is not included in the list of HVA or qualified professionals. If there are doubts, it is key to make a previous analysis.
    • It is necessary to be clear about the frequency of sale and the professionalization regarding the sale of cryptocurrencies or cryptoassets. A “holder” is not the same as a “crypto trader” or an NFT artist.
  • It is not that Portugal has legislation favorable to cryptocurrencies, it is that it has no legislation in this regard. Therefore, we believe that this does not provide much legal certainty and that it could change in the future.

Is the Portuguese NHR a good option for cryptocurrencies?

Despite all this, if you are thinking of moving countries to pay less tax on the sale of your cryptocurrencies or NFTs, Portugal is certainly a great destination.

For example, if you are a large cryptocurrency owner and you are planning to sell large amounts, moving to Portugal and applying for a NHR can be a great option to reduce your tax burden. Mind you, it is highly recommended to do a professional tax analysis beforehand so that you don’t end up paying 20% instead of 0%.

If you want to undertake a change of real tax residence to Portugal and need assistance, do not hesitate to contact us and our specialized NHR advisors will assist you.

And if Portugal does not convince you, consider other star destinations that we expose in our post about selling cryptocurrencies without taxes, or download the report “The top three tax destinations right now”, available below.

Picture of Andreu Capmajó
Andreu Capmajó

Tax director

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