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How Portugal became Europe’s accidental ‘bitcoin heaven’

LISBON (AFP) – As governments slowly shackle the crypto industry with regulations and obligations, Portugal is increasingly isolated in Europe – a place with few rules that investors describe as a crypto paradise.

“You don’t need to do anything else because you already have a perfect system, with zero per cent tax on bitcoin,” said Didi Taihuttu, a prominent crypto enthusiast who shifted his family to Portugal from the Netherlands.

“For bitcoiners, it’s heaven,” he added.

Financial authorities across the globe are grappling with fundamental questions about cryptocurrencies.

Firstly, are they currencies or assets? If they are assets, how do you categorise and tax them?

Right now, Portugal is one of the last countries in Europe to regard them as currencies from a tax point of view, meaning profits from trading are not taxed.

Gold plated souvenir cryptocurrency Tether (USDT), Bitcoin and Etherium coins. PHOTO: AFP

The finance ministry told AFP it was reviewing the situation and wanted a common European framework, but pressure is building for quick action.

Mariana Mortagua, a far-left MP, called recently for urgent regulation and summed up the situation bluntly: “Portugal has become a tax haven.”

Even those in the crypto industry accept that things will have to change.

“It’s hard to justify other financial assets being taxed at around 28 per cent but not cryptocurrencies,” said Pedro Borges of Criptoloja, the first crypto exchange registered in Portugal.

Portugal has long sought foreign cash by giving tax breaks and special visas to foreign investors and so-called digital nomads – those who work online without the need for a fixed business location.

And the tax regime is not the only appeal – beaches, climate and cuisine all figure, particularly for people from northern Europe.

“Portugal has the sun, amazing food and amazing people,” said Taihuttu, who has set up in the Algarve in the country’s heavily touristed south.

“Portugal can become one of the best countries in Europe for living, for investing.”

But while the lifestyle is likely to remain unchanged, the same cannot be said of the tax regime.

One London-based tax lawyer, who asked to remain anonymous, said he would not advise his clients to put their money into Portugal despite its “very lenient” tax system.

“It’s not a long-term strategy of the government to attract companies in the sector, rather it is a legal vacuum,” he said.