Portugal, one of the few countries in Europe where cryptocurrencies transactions are not taxable, plans to close the loopholes in the legal system that prevents the government from taxing virtual assets.
On Friday, Portuguese finance minister Fernando Medina announced that the government plans to bring in legislation on the matter, according to a press conference.
Medina was quoted by the AFP as saying that "we are not going to maintain this vacuum."
The Portuguese minister said the government planned to bring in a new law as soon as possible, despite not committing to a deadline. The model adopted by the government would be fair and ensure that Portugal remains a competitive destination.
Portugal does not consider cryptocurrencies as foreign currency or financial assets, according to the law that came into force after a 2016 ruling by the tax administration. Profits from trading cryptocurrencies are not taxed in the country, making the southern European country a virtual currency paradise.
Individuals who have transactions of cryptocurrencies may not be able to take advantage of the TVA and capital gains tax. The government only taxes business activities that are paid for in digital assets.
Investments in the criptocurrency have become increasingly popular, especially in the real estate sector. The country saw its first apartment sale in bitcoins, without conversion into euros earlier this month.
In a deal in Portugal and Europe, the real estate agency Zome brokered the sale of a three-bedroom home in the city of Braga, worth 110,000 euros $120,000 for three bitcoins.
Susana Duarte, associate partner at the Abreu Advogados law firm in Lisbon, said the new policy is expected to include a capital gains tax. Portugal currently levies a 28 per cent capital gains tax on financial transactions. The government hasn't elaborated on how staking or yield farming will be affected by the new law. She said individual and corporate entities were looking for clarification on the proposal.