Remote work has been on the rise in recent years, but the pandemic made it the new standard and in some (hybrid) form or another is here to stay.
As a result, this trend changed how companies hire and digital nomads want to find the best places to live and work remotely as a location independent remote worker.
Cost of living, Internet speed, good weather, social activities and safety are among the most important factors, but what about "crypto tax friendly"?
Portugal is normally considered as crypto friendly country from a tax point of view, because the Portuguese Tax Authorities considers that income resulting from the sale of cryptocurrencies is not subject to Personal Income Tax unless it is considered that this activity is a professional or entrepreneurial activity of the taxpayer.
There are quite a few nuances on this because the criteria for the definition of what constitutes a professional activity from a tax point of view is not clearly defined by Portuguese law and depends of the tax authorities analysis.
Although current tax framework makes Portugal a crypto tax friendly country from a personal income tax standpoint, there is still a level of uncertainty for the foreseen future.
It is expected that in the future the Portuguese Tax Law introduces a specific tax regime for cryptocurrencies which may give rise or not to taxation. There has been some rumours on Portuguese media that a bill could be introduce to tax cryptocurrencies during crypto hype cycle, nevertheless, currently, there isn't any evidence that there is a legislative process going on.
In the meantime, make sure you fulfil all the conditions to not pay taxes on your crypto at a personal level if you are a Portuguese Tax resident.
Profits regarding cryptocurrencies are tax-free if the total profit generated from private sales transactions in the calendar year was less than 600 Euros.
Additionally, the sale of cryptocurrencies that were held for over a year and the, do not give rise to taxation.
In short, Germany has a very attractive tax regime for long term (more than a year) individual investments in cryptocurrencies or if the annual profit is small (under 600 euros), since these are tax exempt.
At a personal level, capital gains from the sale of cryptocurrencies are taxed in Spain in a range of 19% - 23% (based on income).
If the cryptocurrencies are purchased and sold within a 12 months timeframe, the tax rate can vary between 24.75% and 52%.
Additionally, losses with cryptocurrencies trading are deductible to the capital gains (in the same year or in the subsequent 4 years).
TL;DR between Portugal, Germany and Spain, what is the most crypto tax friendly country?
Well, overall Spain loses this battle because Spanish tax rates are higher than the other two countries.
Both Portugal and Germany offer no taxation on cryptocurrencies, but with different conditions.
In Portugal the conditions depend of your particular situation (that you are not considered a "Professional trader") and in Germany the conditions are related with the transaction itself (less than 600Euro and/or held for more than a year).Taking into account the uncertainty regarding Portuguese tax framework (only based on the position of the Portuguese Tax Authorities which may change and expected future changes in the law), Germany offers the less risky way to get 0% taxes on cryptocurrencies.
Nevertheless, if you are already in Portugal, make sure you can take advantage of the low crypto taxation.
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I worked for 7+ years as a Tax Manager in a consulting firm helping multinational companies structuring their investments internationally. Plus, I've been an enthusiast and dealing with crypto since 2017.
I always got a lot of questions related to crypto taxes. I found that 90% of the info out there is either inaccurate, confusing or very technical lingo.
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