I - Start of the deadline for submitting an IRS tax return
II- Concept of crypto-asset for tax purposes
III - Taxation of cryptoassets
IV - Cash equivalence of income
V - Changes to Model 3
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I - Start of the deadline for submitting the personal income tax return
The deadline for submitting the personal income tax return for 2023 began today (April 1, 2024) (cf. article 60(1) of the Personal Income Tax Code).
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II- Concept of cryptoasset for tax purposes
One of the novelties concerns the taxation of cryptoassets.
In order to better understand the concept of cryptoassets for tax purposes, we would remind you that, by means of Law no. 24-D/2022, of December 30 (State Budget for 2023), article 10 of the CIRS [Capital Gains Tax Code] also added a. k) of paragraph 1 and paragraphs 17 to 21, which read as follows:
“
1 - Capital gains are gains which, not being considered business or professional income, capital income or property income, result from:
(...)
k) The sale for consideration of cryptoassets that do not constitute securities.
(...)
17 - For the purposes of this Code, a crypto-asset is any digital representation of value or rights that can be transferred or stored electronically using distributed ledger technology or other similar technology.
18 - The provisions of the previous paragraph shall not apply to unique cryptoassets which are not fungible with other cryptoassets.
19 - Gains obtained, as well as losses incurred, resulting from the transactions provided for in paragraph 1(k) relating to cryptoassets held for a period of 365 days or more shall be excluded.
20 - Where the provisions of the previous paragraph do not apply and the consideration for the disposals provided for in paragraph 1(k), including those relating to crypto-assets received under the terms of Article 5(11), takes the form of crypto-assets, no taxation shall take place and the crypto-assets received shall be attributed the acquisition value of the crypto-assets delivered, as determined under the terms of this Code.
21 - The provisions of paragraphs 19 and 20 shall not apply to income earned by taxable persons or owed by any person or entity when one or the other is not resident for tax purposes in another Member State of the European Union or of the European Economic Area or in another State or jurisdiction with which an international double taxation treaty, bilateral or multilateral agreement providing for the exchange of information for tax purposes is in force.
22 - For the purposes of paragraph 1(k), the loss of the status of resident in Portuguese territory shall be deemed to be an onerous disposal.”
We should also highlight the fact that, according to the Bank of Portugal, cryptoassets correspond to “digital representations of values or rights that can be transferred and stored electronically. Although they can be used to make payments, as the value of cryptoassets fluctuates a lot, they are mainly used as investment assets", and that, for tax purposes, cryptocurrencies and Stablecoins (with blockchain technology) will be included in the provisions of the aforementioned no. 17, excluding NFTs (non-fungible tokens).
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III - Taxation of cryptoassets
The taxation of crypto-assets essentially falls into the following categories, according to their framework:
1. Category B income [business and professional income (art. 3 and 4 CIRS);
2. Category E income [capital income] (art. 5 CIRS); and
3. Category G income [capital gains] (art. 10).
Thus,
1.
With regard to commercial and industrial activities (article 4(1) and article 3(1)(a), both of the CIRS), operations related to the issuance of cryptoassets, including mining, or the validation of cryptoasset transactions through consensus mechanisms (article 4(1)(o) of the CiRS), it should be noted that, with regard to the simplified regime, taxable income is determined by applying the following coefficients:
a) 0.15 to transactions with cryptoassets, with the exception of that referred to in point d); and
b) 0.95 for income from mining cryptoassets.
(see a) and d) of no. 1 of article 31 of the CIRS);
This income will be deemed to have been obtained at the time of its sale for consideration, under the terms of the aforementioned Article 31(17) of the CIRS, and will only be taxed if the consideration for the sale does not take the form of cryptoassets, with the cryptoassets received being attributed the acquisition value of the cryptoassets delivered.
(see Article 31(17) and Article 10(20) of the CIRS).
Finally, the cessation of activity, as well as the loss of the status of resident in Portuguese territory, will be treated as an onerous disposal, as stipulated in Article 31(18)(a) and (b) of the CIRS, and the general IRS rates set out in Article 68 of the CIRS will apply to this income.
2.
With regard to capital income, Article 5(1) and (2)(u) of the CIRS state that, in addition, the following are considered to be capital income: profits and other economic advantages, which include, in particular, any form of remuneration arising from operations relating to cryptoassets.
This income will be taxed at 28%, in accordance with the provisions of Article 72(1)(d) of the CIRS.
According to Article 5(11) of the CIRS, “The income provided for in paragraph 2(u), when it takes the form of cryptoassets, shall be taxed as a capital gain at the time of disposal of the cryptoassets received”.
3.
As for capital gains, Article 10(1)(K) of the CIRS states that “Capital gains shall be deemed to be gains which, not being considered business or professional income, capital income or property income, result from (...) the onerous disposal of cryptoassets which do not constitute securities”.
In addition, we hereby fully reproduce what was written in “II - Concept of Cryptoassets for taxation purposes”, and it should be emphasized, with regard to their taxation, that the positive balance between capital gains and capital losses, resulting from the operation provided for in the aforementioned a. k) of no. 1 of article 10 will be taxed at the autonomous rate of 28%, under the terms of no. 1 c) of article 72 of the CIRS, without prejudice to the fact that it may be included, in accordance with no. 13 of said article 72.
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IV - Cash equivalence of income
With regard to the pecuniary equivalence of income in the form of cryptoassets, the rules set out in article 24 of the CIRS will apply.
[The pecuniary equivalence of income in kind, including when it takes the form of cryptoassets, is made in accordance with the following rules, which apply successively:
a) By the official list price;
b) The official purchase price;
c) In the case of foodstuffs, by the purchase price on the Lisbon commodities exchange or, in the absence of such a price, by the average price for the respective year or the last price determined and included in the municipal inventory;
d) The prices of similar goods or services published by the National Statistics Institute;
e) The market value, under competitive conditions.”
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V - Changes to Model 3
In view of the changes made to the IRS and mentioned herein, the fields in Modelo 3 have been updated as follows:
1.
Annex B - Category B income:
Creation of two new fields:
Field 419 - Income from operations with cryptoassets
Field 422 - Income from cryptoasset mining.
2.
Annex E - Category E income:
Creation of code E21 to identify any forms of remuneration arising from operations relating to cryptoassets, except when they take on the nature of cryptoassets.
3.
Annex G - Capital gains
Creation of code G25 to identify the sale for consideration of cryptoassets that constitute securities
Annex G1 - Untaxed Capital Gains
In the case of crypto-assets that do not constitute securities held for a period of 365 days or more, the following must be identified: the crypto-asset management entity; the date and value of realization; the date and value of acquisition; the expenses and charges; the country of the counterparty.
- cfr. Circular Letter no. 20269 of the Tax and Customs Authority, accessible via the link https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/legislacao/instrucoes_administrativas/Documents/Oficio_circulado_20269_2024.pdf
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