The best-kept secret is that Portugal was one of the biggest beneficiaries of loose crypto restrictions for the past decade.
The bulk of the Mad Hedge Concierge client list is made up of numerous crypto investors that got into bitcoin at less than $100 to ride the wave up.
Yet, it is common knowledge that the United States treats digital currency as property and taxes it similarly to stocks or real estate.
Why have crypto holders been flocking to Portugal?
Crypto gains aren’t taxed like a capital gains tax or something of that nature on any cryptocurrency.
It made sense for any crypto success to apply for Portuguese residents and take proceeds of the crypto in Portugal without losing a dime.
Over the past decade, Portugal has become an appealing destination for international residents, who have flocked to the country due to its more flexible visa and immigration options and overall affordability.
The weather and food are amazing.
Why do I suddenly bring up Portugal now if it is such a crypto tax haven?
The Portuguese government has proposed a new cryptocurrency tax policy that would take effect as part of its 2023 national budget.
Within the nearly 450-page macroeconomic strategy and fiscal policy report, a small section states that the Portuguese government will impose a 28% capital gains tax on cryptocurrency gains made within one year.
However, gains realized after one year of holding the crypto assets will be exempt from such a tax.
The Portuguese government also intends to impose a 4% tax on any free crypto transfers and will also apply stamp duties where applicable.
The proposal intends to treat crypto as equal to other industries and to establish a clear framework for crypto taxation. 28% is the standard capital gains tax rate in the country.
If these new crypto taxes are implemented, it is nothing short of a disaster for crypto holders who trade short term even if the ones holding over one year are exempt.
Expect trading volume to plummet.
I can guarantee it will face a mass exodus, like India, as companies and investors flee to lower-tax nations.
At this point, it appears as if bad news is piling on top of bad news.
Governments around the world are strapped for cash as historical debt loads worry finance ministers.
There’s a massive hunt for the incremental tax dollar and crypto was the low-hanging fruit in Portugal.
I don’t recommend any Bitcoin investor to apply for Portuguese residence because it has lost its attractiveness overnight.
The interest in crypto is at a 10-year low with some of the biggest daily outflows occurring since June 17, when traders withdrew nearly 68,000 bitcoin from exchanges.
Moreover, over 121,000 bitcoin, or nearly $2.4 billion at current prices, has left exchanges in the past 30 days.
Investors have clearly lost interest in crypto which is why we are seeing sparse volatility.
Buyers and Sellers have both fled.
Now, cross Portugal off the list.
Moving forward, crypto investors must be nimble as the multiple crises around the world mean that governments will go after crypto dollars harder giving fewer places to take proceeds for minimal or no tax.
These events are all highly negative for the price and health of Bitcoin.
