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Don’t get caught paying 53% capital gains tax in 2023

By Mark Quinn
This article is published on: 12th December 2022

The saying goes that there are only two certainties in life: death and taxes. One you cannot control but the other you can through advice and careful planning.

Short-term CGT: approved for 2023
From 1st January 2023 any gain arising from the disposal or transfer of shares/securities held for less than 365 days will be taxed at progressive rates of income tax i.e. 48% plus 2.5%/5% solidarity tax, if your total taxable income (including the gain) is more than €75,009.

Shares/securities held for more than 365 days, or where your total taxable income including the gain is below €75,009, will remain taxable at 28%.

This is important if you or your investment adviser is trading, rebalancing or switching regularly.

Changes to taxation of crypto: budget proposal
Portugal has been touted as a crypto investor’s dream with 0% tax on gains. Although not yet agreed, investors should be aware of the potential changes to the taxation of crypto assets which if agreed, will come into effect in 2023.

Firstly, NFTs could be deemed crypto assets under the new definition. Secondly, it is not just simply selling crypto/NFTs that will trigger a charge – other triggers include purchasing goods and services with crypto or trading for a different type of crypto.

Gains arising on the disposal of crypto will be taxed if held for less than 365 days at 28%. This will apply even if the crypto was purchased before the rules (potentially) come into force on 1st January 2023.

Issuing, mining or validating crypto transactions would be deemed a business activity and taxed as such i.e. 15% of the income taxable at progressive rates without deductions for expenses (if the business did not generate more than €200,000 gross in the previous year). If the business generated more than €200,000 in the previous year, net income is taxable at progressive tax rates (48% plus 2.5%/5% solidarity tax). If trading via a company, 21% plus surtaxes may apply.

CGT and Bitcoin taxes

Solution: wrap it up!
Investing within a tax-favoured structure could shield you from short-term CGT. This means that your investment decisions will not be constrained by the tax implications, and you can benefit from compounding/tax-free roll-up of income and gains.

Become your own tax planner
For those relocating to Portugal, it is an opportune time to tax plan. There is no ‘step-up’ in Portugal, and gains are taxable from the date of the original purchase. You can create your own step-up by rebasing your assets before you leave your home country i.e. sell and repurchase your funds/shares. This will also allow you to utilise any CGT reliefs/allowances that would otherwise not be available in Portugal or be taxed at a much lower rate than 28% depending on your originating country’s CGT tax rules.

Contact us for a free impartial discussion if you would like to understand more.
With over 30 years of combined experience in the industry and over 15 in Portugal, Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates.

Contact us at: +351 289 355 316

Article by Mark Quinn

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