On April 21, 2020, the Portuguese government passed the “Digital Transitional Action Plan.” The act establishes “Free Zones” for the testing of crypto technology. These zones create a flexible regulatory environment for testing purposes, including on-site testing in real-life settings, and provides assistance from regulatory entities. Hence, the program will reduce the regulatory and legal burden that crypto businesses face as they develop and experiment with new technologies.
There are three main focuses for the program: “Capacity-building and digital inclusion of people, digital transformation of businesses, and digitalization of the State.” The rests resulting from the free zones will supply a reliable assessment of the technical and commercial viability of blockchain technology. The key areas of focus for the free zone tests are “regulation, digital privacy, cyber-security and defense, the data economy, communications, and infrastructure.”
Portugal’s policy is to stimulate the economy by aiding crypto companies in their testing stages. Noting the importance of new technologies for economic development and the restructuring of economic structures, the Portuguese government provides testing to capitalize on the new opportunities that cryptocurrency offers. Accordingly, Portugal has established itself as an appealing place to start a crypto-related business. In doing so, Portugal hopes to promote the growth of the crypto industry within Portugal. Indeed, this policy makes Portugal one of the best places worldwide for creating a crypto-related business. Portugal’s regulatory stance aims to incentivize the growth of the cryptocurrency industry within the country’s borders. On the other hand, these tests also provide important information and data that will help the Portuguese government draft effective laws concerning cryptocurrency. Hence, the tests in Portugal will foster regulations that are based on objective data and are what society needs.
[1] António Madeira, Portugal Chases Crypto-Friendly Status With New ‘Free Zones’ for Tech. Cointelegraph, (2020, April 30), https://cointelegraph.com/news/portugal-chases-crypto-friendly-status-with-new-free-zones-for-tech
[2] Marie Huillet, Portugal Unveils ‘Free Zones’ for Emerging Technologies in Digital Action Plan, Cointelegraph; Cointelegraph, (2020, April 24),
https://cointelegraph.com/news/portugal-unveils-free-zones-for-emerging-technologies-in-digital-action-plan
In 2019, the Portuguese Tax & Customs Authority (PTA) declared that buying or selling cryptocurrency is tax-free in Portugal. Specifically, the PTA stated that crypto transactions are not subject to capital gain taxes or value-added tax (VAT). Crypto transactions are exempt from these taxes even though they are analogous to a “means of payment.” However, there are a few exceptions. Crypto exchanges for goods or services does not change the tax treatment of the original transaction. Secondly, taxpayers who trade in crypto as professionals or business activity are still subject to the same taxes.
Crypto is exempt from VAT and capital gains taxes because Portugal treats it as a form of currency. This approach is compatible with the country’s public policy because Portugal forbids taxing the gain on any currency’s value or sale. This policy favors retail traders, who can benefit from a zero-VAT tax policy. Portugal’s Ministry of Finance revealed that retail trades of crypto are not taxable, but income or transactions resulting from professional activities are taxable. The policy also favors crypto miners. In 2019, Portugal’s Tax and Customs Authority declared that mining rewards and crypto payments are not subject to VAT in Portugal.
Source: Freeman Law