For Portugal-based Crypto traders, buying and selling of Cryptocurrencies is set to be profitable following VAT and Capital Gains Tax exemption on transactions.
The Portuguese Tax & Customs Authority (PTA) decision is a rare occurrence given that the US Internal Revenue Service (IRS) is strict on Tax compliance from Digital Assets Traders. Recently, the IRA sent letters to thousands of Crypto investors asking them to declare their taxes and to settle all pending arrears or risk tough sanctions.
The New Law
In a circular written in Portuguese, the PTA reaffirms its position that trading in Digital Assets does not fall under the country’s taxable events. This, therefore, allows participants in Crypto marketplaces to engage freely in their activities.
Nonetheless, there are exemptions. Firstly, merchants accepting Tokens in commercial activities are liable for sales taxes. Secondly, engaging in any professional activity involving Crypto transactions also falls subject to some taxes like PAYE. Summarily, traders are exempts but brokers, advisors, and markets are still required by law to remit taxes.
Portugal Defines Cryptos As Money
The origin of the law dates back to some years when the PTA responded to a filing by a prospective Crypto mining firm in regards to taxes obligations. The commission advised that items such as banknotes and coins are not subject to VAT based on being a legal tender as per Council Directive 2006/112/EC. However, other commodities such as gold, silver, etc. are taxable as they are not legal tenders. This law hence forms the current precedence that excludes Crypto trading transactions from VAT as at the motive of transactions is deemed to be anchored on the premise that Crypto is money.
Additionally, the PTA argues that VAT is only applied in stages of production chains where value is enhanced. In this perspective, Crypto buying and selling has no value addition chains as it is simply a peer to peer exchange of Coins.
On the same perspective, Capital Gains taxation is also not applicable to Crypto transactions as the PTA considers Cryptos are not assets.
European Countries Are Divided On The Issue
The PTA directive is being criticized by some countries in the region. This is despite there being another precedence from Sweden in the Skatteverker v. David Hedqvist court case where ruling declared that VAT cannot apply on Crypto trading. The Swedish Tax Authority appealed to the European Court of Justice (ECJ) where the judgment was upheld.
On another perspective, some countries apply the law depending on how a Tokens are obtained and used.
In the meantime, the US IRA still treats Cryptos as assets. American Crypto fans can only wait for the IRA to learn from the PTA.