CRYPTOCURRENCY IS TAX-FREE IN PORTUGAL

The following is a translated Law court judgement regarding the Cryptocurrency usage for tax purposes. It clarifies what the Portuguese government and law states regarding the use of cryptocurrency.

Here is the original copy of the document/judgement delivered by the Court.

I — Order

1. The Applicant intends to invest in the creation of cryptocurrency. With a view to your decision making you want the clarification accounting and tax framework of the business creation activity cryptocurrency.
2. The Applicant clarifies that the creation of cryptocurrency is usually designated mining. Mining requires processors (computers) for the handling and organization of transactions carried out or posted on the internet. The information related to these transactions is compiled as “blocks”. The accumulation of information in the form “blocks” gives rise to the blockchain, which acts as a logbook of the transactions performed.
3. The organization of the transactions referred to in “block” forms and their blockchain sign-up guarantees “pay” through cryptocurrency, created specifically for this purpose. Cryptocurrency can be exchanged for
“real” currency according to its market value and may be used as a means of payment from vendors that accept the cryptocurrency.
4. Revenues of the entity that carries out the “mining activity” result from cryptocurrency compensation for the organization of transactions in the form of “blocks” and exchanging this cryptocurrency for “real” currency.
5. According to the Applicant, the activity identified above is not performed to anyone in particular. The main expenses of the “mining activity” from the initial investment required in computer equipment,
energy consumption for the operation and cooling of processors and the lease/acquisition of the space required for the placement of processors.
6. The Applicant intends to clarify the accounting framework and VAT, of “mining activity”.
7. The Applicant states that there are two recipes with “mining”, the exchange cryptocurrency by “real” currency and the miner’s remuneration in cryptocurrency.
8. In the first case, the Applicant considers that we are facing an exemption VAT pursuant to Article 9 (27) (d) of the VAT Code. Case №14436 2
9. In the second case, the Applicant raises a number of doubts: whether the remuneration in cryptocurrency constitutes a provision of services on behalf of VAT; considering a provision of services, what type of service should be considered for localization purposes; who is considered the the acquirer of this service and what is the taxable amount of the operation.

II — Background
10. Article 9 (27) (d) of the CIVA is based on Article 135.
paragraph 1 (e) of Council Directive 2006/112 / EC of 28 November 2006 (VAT Directive), according to which the Member States exempt from tax “(a) transactions, including trading, in respect of currencies, currency and the currency of liberatory value, except coins and collection notes, gold, silver or other metal coins, and banknotes which are not normally used for their liberatory value or which have a numismatic interest. “
11. The national rule provides that they are exempt from VAT dealing in foreign currency, banknotes and coins, which are normally used as such, or which have been numismatic interest.
12. As regards the provisions of Article 135 (1) (e) of the VAT Directive, the Court of Justice of the European Union (CJEU), in its judgment in Case delivered on 22 October 2015 in Case C-264/14, in which it At issue was a dispute between the Skatteverker (Swedish Tax Administration) and David Hedqvist, on the basis of a prior opinion given by the Commission of Tax Law (Skatterättsnämnden) on the subjection of value-added tax to of traditional currency exchange operations by the currency bitcoin, or vice versa, which David Hedqvist intended to carry out by through a society.
12. As regards the provisions of Article 135 (1) (e) of the VAT Directive, the Court of Justice of the European Union (CJEU), in its judgment in Case delivered on 22 October 2015 in Case C-264/14, in which it At issue was a dispute between the Skatteverker (Swedish Tax Administration) and David Hedqvist, on the basis of a prior opinion given by the Commission of Tax Law (Skatterättsnämnden) on the subjection of value-added tax to of traditional currency exchange operations by the currency bitcoin, or vice versa, which David Hedqvist intended to carry out by through a society.
13. In the abovementioned case, the ECJ stated that:
1) Article 2 (1) © of Council Directive 2006/112 / EC of 28 November 2006 concerning the common system of value-added tax should be interpreted as constituting benefits services for consideration within the meaning of that provision, transactions, such as those at issue in the main proceedings, which consist of the exchange traditional currency units per bitcoin virtual currency, and vice versa, an amount corresponding to the margin difference between, on the one hand, the price at which the operator concerned to buy the currency and, on the other, the price at which it sells it to its customers;
2) Article 135 (1) (e) of Directive 2006/112 should be interpreted as the provision of services such as those at issue in the proceedings principal, which consist of the exchange of traditional currencies by units of
bitcoin, and vice versa, on payment of a corresponding to the margin consisting of the difference between, for an on the one hand, the price at which the trader in question buys the currency and, on price at which it sells them to its customers are transactions exempt value-added tax within the meaning of that provision.
14. In the present case, the CJEU considered bitcoin as a means of the payment method used in a manner analogous to the means of payment with consequently, these transactions as subject to VAT are still subject to which exempt him.
15. Having regard to the decision of the CJEU in the abovementioned case, the exchange of cryptocurrency for “real” currency constitutes a provision of for consideration, exempt from VAT pursuant to point (d) of (27) of Article 9 of the CIVA.
16. With regard to remuneration on cryptocurrency, this being “currency” a means of contractual payment, we recall the text of the next judgment referred to in this information. Regarding the possibility of applying Article 135 (1) (e) of the VAT Directive only to transactions concerning traditional currency or, on the contrary, also covers other currencies, it is stated that “(…) the exemptions provided for in Article 135,
(1) (e) of the VAT Directive are intended in particular to alleviate the difficulties in determining the taxable amount and the amount of VAT deductible, which arises in the context of financial transactions. However, the operations relating to non-traditional currencies, ie several of the currencies with a
in one or more countries constitute financial transactions provided that these currencies have been accepted by the parties to a transaction as a means of
alternative payment to the means of liberatory value and have no other purpose other than as a means of payment. (…) It is therefore clear from the context
and purpose of Article 135 (1) (e), that an interpretation of that provision concerns only operations relating to traditional currencies would amount to depriving that provision of a part of its effects. “
17. Accordingly, adhering to the arguments used by the ECJ, it is considered that whereas cryptocurrency remuneration is a service subject to VAT whereas Article 9 (27) (d) of the CIVA covers not only the
operations relating to the traditional currency but also operations relating to cryptocurrency.
18. With regard to the location of operations, and since the form of as the question is raised does not allow the individual transactions to be we refer to the clarifications provided in Circulars no. 30164 of 12/11/2014, from the VAT Tax Management Area — Office of the Deputy Director-General and 30165 of 12/26/2014 of the VAT Services Directorate are available for consultation on the Finance Portal.
19. With regard to accounting framework issues, the following are outside the scope of the Tax Management Area (VAT)