The pandemic provided the once-in-a-lifetime opportunity for people to evaluate their working lives and the time to dabble in cryptocurrency.

In the UK, crypto is a chargeable asset and the gains are taxed as your top slice of income.

However, the first £12,300 of your gains are tax-free and are covered by the annual exemption. Gains in excess of £12,300 will be taxed at 20% for higher rate taxpayers.

Thousands of European investors made millions from their crypto trading and started looking for a European country where their crypto gains would be tax-free.

Consequently, these crypto traders flocked to Portugal, a crypto tax haven attracted by the tax exemption, reasonable property prices, stable political environment, and warm weather.

Portugal offered a fixed income tax rate of 20% for 10 years and an exemption from crypto gains to attract wealthy investors to the country. This proved to be very successful with investors from Germany, France, Scandi, and post-Soviet countries choosing to invest there.

These crypto traders have galvanized Portugal’s digital start-up scene and have invested their money in infrastructure and attracting some of the top digital talent in Europe to Portugal.

Crypto transactions in the year to 30 June 2021 amounted to 27 Billion Euros and Portugal is on track to become a significant crypto world hotspot.

Unfortunately, Portugal is now planning to tax crypto gains and many entrepreneurs are threatening to leave as they feel betrayed after investing in the country. Digital businesses are more portable than other businesses and investors are planning to relocate to Malta where crypto gains are still tax-free.

In 2012, Portugal decided to abolish its tax benefits for start-ups and imposed high tax rates leading to an estimated loss of 30,000 new companies and 220,000 jobs.

If a new crypto tax is introduced, history could repeat itself and Portugal may find it is not competitive enough to attract overseas investment.

If you are planning on doing Taxation or Advanced Tax in September or December 2022, I recommend you purchase Tax Condensed or Advanced Tax Condensed which will allow you to learn the technical rules If you then practice the key questions I recommend, you too will be ready for anything the examiner throws at you.

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