Happy tax-free days could become a thing of the past for crypto traders in Portugal, if Finance Minister Fernando Medina has his way. A draft annual budget introducing a tax on capital gains made from crypto has now made it to the parliament.<\/p>\n
The draft budget 2023 document introduced on Monday reveals that a 28% tax could be applied to short-term crypto gains\u2014that is, income made from crypto assets held for less than a year. This is the same rate at which traditional financial instruments are currently taxed in the country.<\/p>\n
The country has long exempted residents from a tax on capital gains from crypto. In fact, it has been the only country in Europe to do so. Germany, the largest economy in Europe, for example, only has a 0% tax rate on crypto gains for long-term holders\u2014those who\u2019ve been holding on to their crypto for more than one year. It also does not tax short-term crypto gains of less than 600 EURO.<\/p>\n
Portugal has been seeing<\/a> a mass influx of migrants over the last decade, and crypto has been of the main reasons behind it. Crypto fans have been flocking<\/a> to the \u201cBitcoin Beach\u201d in Meia Praia to avoid the crypto taxation of other European countries. With the new law, these immigrants will have to look elsewhere.<\/p>\n The move to tax short-term gains from crypto therefore isn\u2019t entirely unexpected. The minister had even warned citizens about the end of tax-free days earlier this year, in May 2022.<\/p>\n Portugal\u2019s move to tax crypto transactions is also an attempt to lower its fiscal deficit. The country is witnessing increased pressure due to inflationary conditions and a slowdown of GDP growth. Officials in Portugal, according to the budget, are expecting a modest 1.3% increase in GDP next year. The debt-to-GDP ratio is expected to hit 122% by the end of this year. That would put<\/a> the country among the bottom three countries with the highest debt-to-GDP ratio.<\/p>\n