Portugal Tax Authorities Clarify That Buying Or Selling Cryptocurrency Is Tax-Free
The United States may be taking a hard line on cryptocurrency, but not all countries are seeking to collect from the virtual currency boom. The Portuguese Tax & Customs Authority (PTA) has announced that buying or selling cryptocurrency in Portugal is tax-free.
The announcement came at the same time that the Internal Revenue Service (IRS) has announced a crackdown on cryptocurrency (more on that here). However, Portugal has taken the opposite tack: it made clear that buying or selling cryptocurrencies would not be subject to capital gain taxes or value-added tax (VAT). The PTA previously clarified in 2016 (downloads in Portuguese as a PDF) that buying or selling cryptocurrency in Portugal would not be considered a taxable event which means that it’s not subject to tax. There are exceptions: the receipt of cryptocurrency in exchange for goods or services doesn’t change the tax treatment of the original transaction, and taxpayers who deal in cryptocurrency as a professional or business activity are still subject to some taxes.
A VAT is similar to a sales tax, but not quite the same thing. A sales tax is a tax typically tacked onto the end of a sale of goods or services, much like state and local sales taxes are imposed. A value-added tax is a consumption tax but, unlike a sales tax, it’s collected at every stage along the production chain. (You can read more about VAT here.)
The U.S. has, since 2014, consistently treated cryptocurrency as a capital asset if it can be converted into cash. This means that capital gains rules apply to any gains or losses. (You can read more on the taxation of cryptocurrencies like Bitcoin according to the IRS here.)
With the announcement, Portugal has made it clear that it is - at least for now - a tax-friendly home for those who buy and sell cryptocurrency. But don’t pack your bags just yet: Remember that U.S. citizens are taxed on their worldwide income, meaning that a trip across the pond won’t be enough to slash your tax bill.
Reference: https://www.forbes.com