In a recent development, Portugal’s Tax Authorities have clarified their compliance requirements for cryptocurrency investors, and here’s the latest update: all investors, regardless of the holding period, are now required to report their crypto assets. While initially, the focus was on tokens held for less than 365 days, the revised guidelines now mandate reporting for both short-term and long-term holdings.
New Reporting Framework
Effective from January 1, 2023, Portugal’s tax policy has undergone significant changes, introducing a legal concept for crypto assets within the Personal Income Tax Code. Investors, including individual investors, short-term sellers, and derivative and leverage traders residing in Portugal, now face updated regulations and tax obligations.
Comprehensive Coverage of Crypto Taxation
The law defines crypto assets as any digital representation of value or rights transferable or storable electronically using Distributed Ledger Technology (DLT) or a similar technology. This broad categorization encompasses various blockchain realities, ensuring comprehensive coverage of assets within the regulatory framework.
While stablecoins fall under the umbrella of crypto assets, non-fungible tokens (NFTs) and assets constituting securities are excluded. The taxation categories include capital gains/trading, staking, validation, mining, salary paid in crypto tokens, and the issuance of tokens.
Taxation Categories and Rates
Capital gains from the sale of crypto assets held for over 365 days are exempt from taxation, providing a more favorable scenario for long-term holders. For assets held for less than 365 days, a 28% tax rate applies to the gains realized from transactions.
Streamlined Reporting for All Holders
In response to the evolving landscape, the Tax Authorities have adjusted their compliance requirements. Investors are now mandated to report on both short-term and long-term holdings, ensuring a more comprehensive and uniform approach to crypto taxation.
Considerations for Short-Term Holders
This revised reporting framework acknowledges the challenges faced by short-term holders engaged in frequent transactions and complex trading strategies. Investors should familiarize themselves with the specifics of the reporting process to ensure compliance with the updated regulations.
How to Report in a Complient Way?
There are several software that can help crypto investors organize their crypto transactions, such as CoinLedger, Coinpanda, TaxBit, and ZenLedg, but none is perfect. However, we have been working with Koinly, and it can solve 60% to 80% of the work. However, the user will still have to manually input the final report, especially to explain deposits and some transactions that the software can´t catch the thread of transactions.
Available in over 20 countries around the globe, Koinly is the crypto tax software designed for crypto enthusiasts, Koinly offers a comprehensive level of support for cryptocurrency exchanges and wallets. It accepts payments with BTC, ETH, DAI, and USDC and also supports over 17,000 inflationary and deflationary cryptocurrencies- meaning you can report your gains and losses for the most popular cryptocurrencies, altcoins, and stable coins–making Koinly the best option for frequent traders.
Furthermore, it also offers over six years of prices: historical crypto and fiat spot prices can assure users that their costs are accurate. And track your crypto assets and taxes and visualize their actual Return on Investment (ROI), income overview, and profit/loss & capital gains. In addition, crypto traders can connect their accounts via API (advisable view only), and add their BTC wallets using x/y/zpub keys and ETH tokens with their public addresses.
Information required to be reported
If, as usually is the case, the user uses a centralized exchange abroad when its headquarters is outside of Portugal, we will be required to fill in the following information:
For the identification of the holder, use the codes that have been defined as:
- In the “Managing Entity” column, enter the NIF (tax identification number) and country of the natural or legal person, body, and entities without legal personality that provide custody and administration services for cryptoassets on behalf of third parties or manage one or more cryptoasset trading platforms;
- The realization value is determined in accordance with the rules set out in Article 44.º of the IRS Code;
- The acquisition value is determined in accordance with article 45.º of the IRS Code.
In order to determine the realization and acquisition values, the existence of special relationships must also be taken into account.
Under Article 63(4) of the IRC Code, the existence of special relationships must also be considered.
In determining the realization and acquisition values, the existence of special relationships must also be taken into account under the terms of Article 63.º n.º 4 of the IRC Code, and this value must take into account the provisions of Article 43.º of the IRS Code.
- In the “Expenses and charges” column, only the necessary and actually necessary and actually incurred, inherent to the acquisition and disposal of the cryptoassets;
- In the “Country of the counterparty” column, the country of residence of the counterparty must be indicated
(of the acquirer) must be indicated, using the country code according to table X in the instructions in Annex J.
Cryptoassets sold in an Exchange abroad
The taxpayer will be required to report the following information as per this order:
- In the first column (Country of Source) you must indicate the code of the country of source of the income, using the codes in Table X at the end of these instructions.
- The codes in Table X are at the end of these instructions (Country codes – Name of the country).
- The second, third, and fourth columns (Selling – Year, Month and Day) should indicate the date of realization;
- In the fifth column (Selling – amount) enter the amount value (total sale mount) of the crypto-assets, determined in accordance with the rules laid down in Article 44.º of the IRS Code;
- The sixth, seventh and eighth columns (Acquisition – Year, Month and Day) should indicate the date of acquisition, which corresponds to that of the act or contract of purchase;
- In the ninth column (Purchase – Value) indicates the acquisition value of the cryptoassets, determined under the terms of Article 45.º of the IRS Code.
- When determining the realization and acquisition values, account must also be taken of the existence of special relationships under the terms of Article 63.º n.º 4 of the IRC Code, and this value must take into account the provisions of Article 43.º n.º 9 of the IRS Code.
- In the tenth column, “Expenses and charges“, only the necessary and actually incurred expenses, inherent to the acquisition and incurred, inherent to the acquisition and disposal of cryptoassets;
- In the eleventh column (Tax paid abroad), the amount corresponding to the tax paid abroad must be indicated.
- In the twelfth column “Country of the counterparty“, the country of residence of the counterparty (of the buyer) using the country code according to table X.
You can have a better understanding of the way to report in the table below:
So, in summary:
a) Country of the source of the income (if you do not have a specific one, use the one of the exchange)
b) Sale Year, Month, Day and total amount;
c) Purchase Year, Month, Day, and total amount;d) Expenses (gas, fees, etc);
e) Taxes paid abroad;
f) Country of the counterparty, if you do not have the country of the person who purchased it, use the one of the exchange;
g) Information if you hold for more or less than 365 days.
As Portugal’s crypto tax policies continue to evolve, investors must stay informed about the latest updates. The requirement to report both short-term and long-term holdings reflects a balanced approach to regulatory oversight. Whether you are a short-term or long-term crypto investor, understanding and adhering to the revised reporting guidelines is crucial for navigating Portugal’s dynamic crypto tax landscape effectively. Seek professional advice to ensure compliance and make informed decisions in this ever-changing regulatory environment.
This summary is not binding in any way, has been written as an article of analysis and opinion, and does not dispense with consultation of the Law, as well as advice regarding existing obligations. We recommend that you seek appropriate legal advice.
If you still have any questions, please do not hesitate to contact us at: email@example.com
Rodolfo José Santos