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Tax treatment for blockchain and cryptocurrencies has not been updated under the Portuguese regime.1
The Portuguese Tax Authority (PTA) has already issued binding rulings on the implications of cryptocurrency transactions for value added tax (VAT) and personal income tax (PIT).1
With regard to VAT, and in line with the Court of Justice of the European Union (CJEU) interpretation of VAT treatment of transactions with cryptocurrencies, the PTA has ruled that transactions such as exchanging cryptocurrency for traditional currency (and vice versa) and mining activities should be exempt from VAT.1
In accordance with the CJEU judgment, which holds true across all Member States, the binding rulings issued by the PTA have been a major contributor to outlining the VAT treatment of cryptocurrency transactions. This has provided a more secure atmosphere for entities that exchange cryptocurrencies, start-ups and users in Portugal when it comes to dealing with VAT. Buying, selling, sending, receiving, accepting and spending cryptocurrencies as payment for legal tender currency (or vice versa) will not entail any VAT liabilities and thus implies that these digital assets can be treated similarly to legal tender currency or other kinds of money.1
The PTA declared that any profits derived from the conversion of cryptocurrency to legal tender currency (or vice versa) should not be counted as income for PIT purposes, if the activity does not constitute a business or professional pursuit. It was concluded that income arising from the sale of crypto would not be considered capital gains or investment revenue in terms of the Portuguese PIT Code. Nonetheless, the PTA did not provide any criteria to establish when the exchange of cryptocurrency is a trading activity that constitutes a business or professional venture.1
However, binding rulings only bind the PTA in relation to the taxpayer who raised the ruling request and only as to the specific facts presented and questions raised in the ruling request. PTAs are not legally bound to other taxpayers or in respect of facts or questions other than those raised in the ruling request. Taxpayers who raised the ruling request are not strictly bound by the ruling.1
Virtual currencies in Portugal
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