Portugal, one of the few countries in Europe where cryptocurrency transactions are not taxable, plans to close the loopholes in the legal system that prevents the government from taxing virtual assets.
On Friday, Portuguese finance minister Fernando Medina, in a press meeting, announced that the government plans to bring in legislation on the matter.
“We are not going to maintain this vacuum," AFP quoted Medina as saying.
Although not committing to a deadline, the Portuguese minister said the government planned to bring in a new law "as quickly as possible". The model adopted by the government would be fair and ensure that Portugal remains a competitive destination, he said.
According to the law that came into force after a 2016 ruling by the tax administration, Portugal does not consider cryptocurrencies as foreign currencies or financial assets. Hence, profits from trading cryptos are not taxed in the country, making the southern European country a crypto paradise.
VAT and capital gains tax are not applicable to individuals for their transactions of crypto assets. The government only taxes business activities that are paid for in digital assets.
As a result, investments in the cryptocurrency have become widely popular, especially in the real estate sector. Earlier this month, the country saw its first apartment sale paid in bitcoin, without conversion into euros.
In an unprecedented deal "in Portugal and Europe", real estate agency Zome brokered the sale of a three-bedroom home in the city of Braga, worth 110,000 euros ($120,000), for three bitcoins.
Speaking to Coindesk, Susana Duarte, associated partner at Abreu Advogados law firm in Lisbon, said the new policy is expected to include a capital gains tax. At present, Portugal levies a 28 per cent capital gains tax on financial transactions. However, the government has not elaborated on how staking or yield farming will be affected by the new law. She said individual and corporate entities were both seeking clarification on the government's proposal.