Portugal’s Tax and Customs Authority (AT) on Thursday, May 31, published guidelines on how different tokens and tokens issuance (ICOs) will be taxed. AT guidelines defines a handful of taxes for digital tokens and has also helped to answer burning questions among Portuguese crypto enthusiasts.
Portugal’s Tax and Customs Authority also known as Autoridade Tributária e Aduaneira tax ruling was in response to a company that was planning an ICO and a token built on top of Ethereum network and had requested for clarification as to whether its token would qualify for a value-added tax (VAT) exemption similar to what is offered for legal tender. The token was described to be akin to Bitcoin. Conversely, the scant details provided shows that it actually seemed to resemble a utility/usage token. Reportedly, the company intends to build a global e-commerce platform dubbed MMM, and will have a native currency necessary for users to utilize the service, Ether News reported.
Value Added Tax (VAT) in EU is generally based on consumption tax assessed on the value added to goods and services. Most products and services traded across the EU, are a subject to VAT, but exports sold overseas are exempted. According to the document published on AT website, MMM stated that their users might come from EU Zone, US or any other part of the world.
AT announced that transactions that contain a token could, in principle, be deemed as an onerous transfer of goods. Thus, the tokens should have VAT liability. However, the AT also admitted that cryptocurrencies could be eligible for the legal tender VAT exemption.
An earlier tax ruling in Portugal had clearly defined income tax exemptions for the sale or purchase of tokens. As per that ruling, since there is no revenue category covering digital currency gains, there is no requirement to include them when filing individual tax income returns.
The Portuguese tax man has done what only a few other nations have done. Earlier this year, Tokens24 reported that the Council of State in France defined digital currencies as movable property and then halved its crypto income tax rate on capital gains, incentivizing citizens to invest and even take some profits in the crypto market.