Poland Crypto Tax Guide 2023
Curious about crypto taxation in Poland? Explore our comprehensive guide for 2023 and navigate the ins and outs of crypto taxes hassle-free.
Curious about crypto taxation in Poland? Explore our comprehensive guide for 2023 and navigate the ins and outs of crypto taxes hassle-free.
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Portugal has been a cradle for crypto investors ever since Bitcoin blew up and people started making astronomical gains on their investments. This compelled authorities in Portugal to moderate the space with taxes. Portugal has often been referred to as El Dorado for such investors.
Up until now.
In October 2022, the OECD published its final guidance on the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard set forth to announce compliance with the international crypto transparency standards. The Portuguese State Budget for 2023 modified the definition of crypto assets to accommodate crypto taxation and eliminate the existing tax loopholes that prevented their taxation.
If you’re curious about what has changed and how that will affect you, you’ve landed right where you should because we will tell you everything you need to know to conveniently file your crypto taxes at the end of this financial year.
According to the changes proposed by the new budget, crypto assets are now defined as "any digital representation of value or rights that can be transferred or stored electronically using distributed ledger technology or similar". Which considers every class of crypto asset except single crypto and non-fungible tokens.
This definition complies with the agreement reached within the scope of the Regulation of the European Parliament and of the Council on Markets in Crypto-assets and Amending Directive (EU) 2019/1937. So now crypto assets are taxable in Portugal starting this financial year, and any gains made from the disposal of these assets will be subjected to capital gains tax. Any income generated from these assets is considered business income and taxed accordingly.
In Portugal, there are three categories for crypto transactions concerning tax purposes:
These categories are discussed in further detail later in the blog. The income generated from crypto transactions is subject to a progressive tax rate that varies from 14% to 53% based on your total income.
Consider the following transactions:
You bought 1 BTC for €12,000 in March 2022, and you later disposed of that BTC in July 2022 for €16,000.
Now capital gain/loss is simply the difference between the disposal amount and the cost basis (the amount paid for acquiring the asset).
Capital Gain/Loss = €16,000 - €12,000 = €4,000
A flat rate of 28% is charged on this €4,000 gain. If your taxable income, including aggregate gains and losses, reaches or exceeds €78,834, progressive tax rates ranging from 14.5% to 53% will be applied to those gains based on your income level.
Moreover, for any gains incurred from transactions that are not mining profits, not airdrops, not NFTs, not PoS newly minted tokens and not capital gains, 15% of the income is taxable under the regular income tax brackets, and 85% is pure profit.
For instance, if you make a €100 gain, then €15 will be taxable under income tax brackets and the rest €85 will be profit.
Since crypto assets now have a new definition which allows for their taxation, any gains incurred from the disposal of crypto assets will be subjected to a capital gains tax. Unlike most European countries, Portugal doesn't have a progressive tax system and levies a flat tax rate across all transactions, irrespective of income group, demographic, or any other categorisation. A flat rate will apply to a positive balance of capital gains and losses arising from the disposal of said assets unless they are held for more than 365 days, in which case an exemption will be available unless your crypto assets are not categorised as securities.
There are three categories your transaction might fall into for tax purposes. Out of those three two categories are concerned with capital gains tax and are, hence discussed below:
When you receive compensation in fiat currency as a result of your passive crypto investments, without involving any crypto transactions, it falls under this classification. The tax rate applied to such income is a fixed 28%. This category applies if your crypto income doesn't fall under any other classification.
In Portugal, the taxation of crypto assets entails several factors to consider. If you’ve held crypto for less than one year, any capital gains made with fiat currency will be subject to a 28% tax rate. On the other hand. Gains accumulated over a year will be subject to a progressive tax rate ranging from 14% to 53%.
Security tokens are classified as securities and therefore have similar tax implications. Moreover, capital gains and losses from the sale of shares and other securities must be aggregated if they are held for less than 365 days and the taxable income exceeds EUR 78,834.
The 365-day rule does not apply to individuals or entities outside the European Economic Area or jurisdictions without a Double Tax Agreement. If a person stops being a tax resident of Portugal, an Exit Tax of 28% will be imposed on all crypto assets held at the time, based on the difference between their market value and acquisition value determined through the FIFO accounting method.
Transactions involving the issuance of crypto assets, such as mining or validating crypto asset transactions through consensus mechanisms, are considered commercial and industrial activities and are taxed accordingly.
Under the simplified taxation regime, the taxable income is determined by applying a coefficient of 0.15 to the sales of crypto assets that are not classified as capital gains, airdrops, staking rewards, or NFT rewards. However, in the case of Proof-of-Work (PoW) mining of crypto assets like Bitcoin and Dogecoin, the coefficient is 0.95.
Income derived from the aforementioned transactions is considered realized at the moment of transferring the crypto assets in exchange for consideration. Termination of the activity or loss of Portuguese residency is treated as equivalent to transfers for consideration.
In Portugal, capital gains are taxable, and losses can be deducted from taxes. Therefore, it is important to understand how to calculate your crypto gains and losses accurately. The process involves two steps when dealing with a tax system that imposes capital gains tax on crypto disposals.
Firstly, you need to calculate the cost basis for each asset that you have sold, gifted, or exchanged during the tax year. This includes adding up the acquisition cost and any associated fees such as transaction fees and gas fees. You can deduct the following expenses during cost-basis calculations:
costs of making a valuation or apportionment to be able to calculate gains or losses
Once the cost basis is determined, you can calculate your capital gains or losses by subtracting the cost basis from the disposal amount. If the result is positive, it represents a gain and is subject to capital gains tax. Conversely, if the result is negative, it indicates a loss. Although losses do not incur tax liabilities, it is essential to track them as they can be deducted from your taxes in Portugal.
Consider the following set of transactions:
13/01/23 - Kevin bought 12 BTC for €12,000 each
12/02/23 - Kevin bought 10 ETH tokens for €1,400 each
15/03/23 - Kevin sells 12 BTC for €20,000 each
17/04/23 - Kevin sells 10 ETH for €1,800 each
As evident from the above ledger, Kevin made 2 disposals, so let’s calculate the collective gain from both disposals.
12 BTC sold for €20,000 each
Note that we will use the FIFO accounting method, as recommended by the tax authorities, to calculate individual gains. With FIFO, you sell the first asset you bought as an investor.
These BTC tokens are the same ones acquired on 13/01/23 for €12,000 each
Cost basis = €12,000
Disposal Amount = €20,000
Capital Gains/loss = Disposal Amount - Cost Basis = €20,000 - €12,000 = €8,000 (For 1 BTC)
Gain from 12 BTC = 12*8,000 = €96,000
10 ETH sold for €1,800 each
These ETH tokens are the same ones acquired on 12/02/23 for €1,400 each
Cost Basis = €1,400
Disposal Amount = €1,800
Capital Gain = Disposal Amount - Cost basis = €1,800 - €1,400 = €400(for 1 ETH)
Gain from 10 ETH = 10*400 = €4,000
Total Gain from both disposals = €96,000 + €4,000 = €1,00,000
The gains will be taxed at a flat 28% tax rate since the disposal was made within a year.
According to the new tax regime, losses incurred via the disposal of crypto assets can be treated as tax-deductible in Portugal, given that losses are reported on the tax return in the same year they occur. A negative balance between crypto gains and losses can be used to offset up to 70% of your gains and can be carried forward for up to 5 years.
In Portugal, lost or stolen crypto is not considered a tax-deductible expense. This means you cannot claim a deduction for any losses incurred due to theft, loss, or other similar circumstances. However, if you have suffered a loss due to theft or another crime, you may be able to claim compensation or insurance benefits, which could help to offset your losses.
Although the crypto tax regime in Portugal is new and barely talked about, we were able to extract a few strategies that may help you lower your tax bill. However, note that this is purely subject to the assumption that no new additions will be made to the new tax regime this year.
As previously mentioned in the blog, if you’ve held your crypto for more than a year, you don’t need to pay any taxes on your gains unless the assets in your portfolio are categorised as securities.
If you donate to a family member or friend, it may be subject to the gift tax. The gift tax rate in Portugal varies depending on the value of the gift and the relationship between the donor and the recipient.
For example, if you give a gift to a spouse, descendant, or ascendant, the gift tax rate is 0.8% for gifts up to €1,000,000 and 1.2% for gifts over €1,000,000. For gifts to other individuals, the gift tax rate is 10%.
In Portugal, individuals who donate to registered nonprofit organisations can qualify for tax exemptions on their income tax returns. The tax exemption is calculated at 25% of the donated value, with a maximum limit of 15% of the donor's taxable income.
This means that individuals can donate up to 15% of their taxable income and receive a tax deduction equivalent to 25% of the donation amount. To be eligible for the tax exemption, the nonprofit organisation must be registered with the Portuguese Tax and Customs Authority and meet specific criteria. The donation must be made by a Portuguese resident or a non-resident who receives income from Portuguese sources.
The most commonly used method is FIFO (First-In, First-Out) accounting, which assumes that the first items purchased are the first items sold or used. While businesses in Portugal are not prohibited from using LIFO or HIFO accounting, they may need to justify their use of these methods and demonstrate that they are consistent with GAAP and accurately reflect the company's financial position.
Here’s an example that explains how FIFO accounting works:
Let's say you bought 1 Bitcoin (BTC) for €5,000 on January 1st, another 2 BTC for €7,000(each) on March 1st, and 3 BTC for €8,000(each) on May 1st. On June 1st, you decide to sell 1 BTC for €12,000.
Based on the FIFO accounting method, the BTC you sold would be the first one you bought in January, with a cost basis of €5,000. You sold it for €12,000, resulting in a capital gain of €7,000.
Under Portugal's tax laws, income from transactions involving crypto-assets is considered professional or commercial. If the taxpayer's gross business income in the previous fiscal year is below €200,000, it will be taxed as business income.
For income generated from crypto-asset operations conducted as a business, 15% of the gross income will be subject to progressive tax rates without considering other deductions or costs. The effective tax rate should not exceed 8% of the gross proceeds in such cases. In the case of mining activities, 95% of the gross income will be taxable at progressive rates.
Income derived from crypto transactions is taxed at a progressive tax rate ranging between 14-53%.
Calculating your crypto income is a fairly straightforward process, you just need to add all the individual gains and any additional income incurred from activities like staking and mining. The value of the assets received as mining and staking rewards is simply taken to be the fair market value of the assets upon disposal.
Under the new tax regime in Portugal, most crypto transactions are now taxable. However, there are still some transactions that remain tax-free-
Here are taxable crypto transactions in Portugal:
In Portugal, income derived from mining activities related to cryptocurrencies is considered a professional or commercial activity and is subject to taxation under the country's tax laws.
The Portuguese Tax Authority applies progressive tax rates to mining activities, where 95% of the gross income is subject to taxation. This means that as the income amount increases, the tax rate also increases progressively.
The remaining 5% is presumed to be a fixed expense while carrying out the mining activities. Alternatively, if the mining activity is ceased, 85% of the sale price is considered taxable income. For instance, if a taxpayer earns €1,000 from mining, they will only be taxed on €950 in the former scenario, or €150 in the latter.
Taxpayers with income not exceeding €200,000 ($210,000) of gross business income in the previous fiscal year will be subject to a special tax regime. Under this regime, 15% of the gross income from the majority of cryptocurrency operations carried out under a business activity will be taxable at progressive rates, with the effective tax rate capped at 8% of gross proceeds.
Staking and mining are two different ways of adding and validating transactions on a blockchain. Proof-of-Work networks support mining and Proof-of-stake networks support staking.
The Portuguese Tax Authority (AT) has not provided specific guidance on the taxation of staking rewards. However, it is generally understood that tax authorities consider staking and mining rewards as similar. Therefore, it can be reasonably assumed that staking rewards would be subject to the same tax liabilities as mining rewards in Portugal.
In the same vein, we suggest seeking guidance from an experienced tax professional to avoid complications.
In Portugal, income derived from crypto margin trades, futures, and Contracts for Difference (CFDs) is subject to taxation as capital gains. The capital gains tax applies to the difference between the purchase price and the sale price of the asset, and the applicable rate varies depending on the capital gains earned by the taxpayer.
When donating to a family member or friend in Portugal, the gift tax rate depends on the value of the gift and the relationship between the donor and recipient. Rates range from 0.8% to 10%. Free transfers of crypto assets are subject to Stamp Tax at a rate of 10%. This applies when the crypto assets are deposited in institutions located in Portugal. Moreover, the tax is applicable if the author of the transfer has their domicile in Portugal in the case of inheritance, or if the beneficiary has their domicile in Portugal in the case of other free transfers.
For donations to nonprofits, the tax exemption is calculated at 25% of the donation's value, up to a maximum of 15% of the donor's total taxable income. The nonprofit organization must be registered with the Portuguese Tax and Customs Authority, and the donor must be a Portuguese resident or receive income from Portuguese sources to qualify for the tax exemption.
The AT is yet to release any concrete guidance on the taxation of income from ICOs. The Portuguese Securities Market Commission (CMVM) is closely monitoring the launch of tokens through Initial Coin Offerings (ICO). In a press release dated July 23, 2018, CMVM advised that anyone planning to launch a cryptocurrency should first contact them. CMVM emphasised the need to evaluate each case individually due to the complexity of cryptocurrencies.
However, we’re still awaiting fresh guidance regarding their taxation and will update relevant details here as soon as the guidelines are released.
The AT is yet to release any guidelines on income received from DAOs. We are constantly looking for new guidelines, and all relevant details will be added here as soon as they hit our radar.
The new tax regime doesn’t have any guidance concerning the taxation of NFT-related transactions since the revised definition of digital assets doesn’t have any mention of NFTs, therefore, it can be assumed that NFT transactions are exempt from personal income tax laws.
There is no specific guidance on how DeFi transactions will be taxed in the new tax regime. However, a few details can be inferred from the existing guidelines and looking at how other European countries with similar tax laws view DeFi transactions.
Drawing from the current tax legislation, it appears that any income made from lending activities will be categorised as capital income and subjected to taxation. Moreover, if an investor earns a reward from a DeFi platform based outside of Portugal for staking, or offering liquidity, such earnings may be exempted from taxation if they have already been taxed in the source state given that a double tax agreement exists between that state and Portugal.
In Portugal, if an individual receives free cryptocurrency through an airdrop, it is taxed under stamp duty laws. The value of the tokens received would be determined based on their market value at the time of receipt and a flat tax rate of 10% is levied on those gains.
In Portugal, in the event of a fork where a new cryptocurrency is created from an existing one, the new tokens may be viewed as taxable income. However, whether it is taxable or not would depend on the specific circumstances of the fork and whether it meets the criteria set by the tax authorities for taxable income.
The tax year in Portugal runs from January 1st to December 31st. Tax returns must be filed by April 30th of the following year, unless the taxpayer has a certified tax representative or has opted for an extension to file the return, in which case the deadline is extended to May 31st.
It's important to note that taxpayers who fail to submit their tax returns on time may be subject to penalties and fines. Moreover, if a taxpayer's tax situation changes during the year, they may need to report and pay taxes quarterly or monthly.
In Portugal, taxpayers can file their tax returns online through the Tax Authority's website or the eFatura platform. Here’s a stepwise tutorial on how you can file your crypto taxes online using the eFatura portal:
Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptoskatt can make this task easier for you:
If you need more details regarding the integrations or generating your tax reports, you refer to our video guide here.
When filing taxes in Portugal, the Autoridade Tributária e Aduaneira (AT) may require individuals to provide various records and documents related to their crypto activities. Some of the records that may be requested by the AT include-
Although there’s no legal way to avoid paying crypto taxes entirety, you can use some of the strategies given below to lower your tax bill:
These strategies have been discussed in detail above under the section titled “Crypto Tax Breaks Portugal”.
1. Is Crypto Legal in Portugal?
Yes, cryptocurrency is legal in Portugal. In 2021, the Portuguese Parliament passed legislation offering a legal framework for the issuance and use of cryptocurrencies, blockchain technology, and related services.
2. Is any Crypto tax-free in Portugal?
No, no cryptocurrency is inherently tax-free in Portugal. The Portuguese tax system requires individuals to report any income or gains earned from cryptocurrency transactions and pay taxes accordingly.
3. How to file crypto taxes using Kryptoskatt?
We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a step-wise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptoskatt.
All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptoskatt does all the heavy lifting for you. The platform can auto-fetch all your transaction from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic all you need to do is try it once.
4. How is Crypto as Wages Taxed in Portugal?
In Portugal, the tax treatment of cryptocurrency wages depends on the nature of the income received. If cryptocurrency wages are classified as salary (Category A under the PIT Code), they will be subject to capital income tax. On the other hand, if cryptocurrency is classified as self-employment income (Category B under the PIT Code), it will be taxed as self-employment income.