Bitcoin - Forex Combo Strategy: Bitcoin is Tax Free in Portugal
Be a step ahead!
To receive new articles instantly Subscribe to updates.
Bitcoin - Forex Combo Strategy: Bitcoin is Tax Free in Portugal
Welcome back everyone to this week’s edition of my Bitcoin - Forex Combo Strategy. Price action in Bitcoin has retaken the $10,000 level and while some analysts claim that this was the last time we see the price below $10,000, I have to disagree. I think what we are witnessing right now may be a bull trap which sucks buyers into the vortex before we see another sell-off. This doesn’t change my long-term bullish view, but I am not ready to ride the bull just yet. While the $8,870 - $9,927 support area remains strong and a potential long-term floor for future correction, especially once we challenge the $20,000 mark, I won’t rule out a sell-off which could take us as low as the narrow $6,380 - $6,550 support area.
I will turn more bullish once we push above the previous intra-day high of $12,271. There is quite a bit of resistance and bearish pressures are mounting, despite the most recent advance. During last week’s update “Bitcoin - Forex Combo Strategy: Swiss Crypto Banks”, I explored the emergence of two crypto banks which received a banking license in Switzerland. Today I want to take a look at Portugal where Bitcoin is tax free, at least for the tome being. Portugal is part of the European Union and I doubt that Brussels will allow Portugal to become a cryptocurrency tax haven inside its jurisdiction. The size of Portugal and how Brussels views it also makes it an easy target to be pushed around which remains an unfortunate circumstance.
Before taking a look at what the current tax regime looks like for cryptocurrency traders in Portugal, how long it may last and how it impacts the industry as a whole, let’s take a quick look at my own cryptocurrency portfolio. I didn’t add any new positions to my hodlings, but I was eyeing Litecoin’s price action moves. Since I think we could see another leg down before a sustained rally, I will shore up my cash portfolio and increase it through my forex trading so that I can take full advantage when the bull trap snaps. In the meantime I hodl my 500 Bitcoin at an average entry price of $8,500, my 40,000,000 Ripple at an average entry price of $0.3388 and my 20,000 Litecoin which I bought at $77.00. The three charts below show my Bitcoin, Ripple and Litecoin holdings.
Bitcoin is Tax Free in Portugal
The biggest non-sense is that on one hand countries don’t want to accept Bitcoin and other cryptocurrencies, try to prevent their adoption and choke off the move away from government controlled fiat currencies while on the other hand they want to tax it. Not so in Portugal where the Autoridade Tributária e Aduaneira (Portuguese Tributary and Customs Authority) responded to a request from a cryptocurrency firm in regards to setting up mining operations in the country and the applicable tax code. The Portuguese Tax and Customs Authority already ruled that income generated from cryptocurrency trading is tax free.
It has now further stated that cryptocurrency exchange as well as payments are not subject to the countries VAT (value added tax). The company which inquired about the accounting and tax law has listed two areas of concerns in this matter when it comes to mining cryptocurrencies. The first one is by minting or creating digital assets and the subsequent exchange of the mining reward into fiat currency. The Portuguese tax authority referred the firm to local regulations as well as EU law and in its own conclusion noted that mining and exchange activities should be exempt from taxes. This means that Portugal treats cryptocurrencies the same as fiat currencies and not as an asset.
ECJ Ruled Cryptocurrencies Are Tax Exempt
The European Court of Justice (ECJ) ruled in October of 2015 that cryptocurrency transactions are tax free. Judges ruled that Bitcoin is a means for payment and the exchange of it is therefore not subject to VAT. The case is known as Skatteverket v Hedqvist Case C-264/14 and it was ruled that Bitcoin trading is subject to Article 135(1)(e) of the EU VAT Directive which covers transactions in bank notes, currency and coins which are used as a legal tender. David Hedqvist from Sweden planned to launch a cryptocurrency exchange and sought tax clarity. The Swedish Revenue Law Commission (Skatterättsnämnden) referred him to Article 135, but the Swedish Tax Administration (Skatteverket) appealed the ruling and the case was sent to the ECJ which ruled in favor of tax exemption. This ruling determines the treatment of cryptocurrencies in Europe for the time being.
PaxForex offers traders the means to transact in cryptocurrencies and is home to one of the fastest growing trading communities of profitable traders, join us now and grow trade-by-trade!
What is Category B in Portugal?
According to the tax authorities in Portugal, trading income falls in three categories. Capital gains are classified as (Category G). Trading cryptocurrencies would fall under this category which covers the income earned on the sale securities, assets and financial derivatives, but legislators adopted a closed definition which means taxes only applied to items listed in the category; cryptocurrencies are not mentioned in the law. Capital income (Category E) refers to income generated from capital investments which is not applicable to cryptocurrency trading.
This leaves us with corporate or professional income (Category B) which is taxed based on the activity and not the source of it. Since most cryptocurrency traders don’t act in a professional capacity, the tax authority stated that income generated remains tax free. According to Luis Leon, a tax partner at Deloitte Portugal, “Portugal does not tax the increase of value of any currency nor the gain on the sale of any currency. Obviously, any currency losses may not be offset against any gains either.” Portugal is a great example for the cryptocurrency industry as it treats it on par with fiat currencies.
Leon further added “Cryptocurrencies are no different from a Portuguese tax perspective. Accordingly, the appreciation of cryptocurrencies or any gains on the direct sale of cryptocurrencies are not taxed in Portugal.” Interesting that the most applicable tax category for cryptocurrencies, led by Bitcoin, is labeled as Category B. Portugal is not alone inside the EU. Slovenia neither reports nor taxes cryptocurrency related trading of individuals and Malta as well as Germany don’t tax long-term crypto trades exceeding one year. Outside the EU, Switzerland treats trading income generated from trading as a tax-exempt capital gain and Belarus issued tax breaks for cryptocurrency related activity for five years.
Forex Portfolio Updates
Now let’s get to my forex portfolio updates. Just a few moments ago I decided it was time to cash out on my Silver trade. I closed my 100 lots long position at 19.400 for a profit of $1,500,000. We may see more upside as geopolitical tensions rise, but I am shoring up capital in order to deploy it into the cryptocurrency market. My 200 lots EURJPY long position which I took on August 26th 2019 at 116.750 for a margin requirement of $44,363 with a pip value of $1,890.77 remains open. The two images below show my closed Silver trade and my open EURJPY long position.
On August 29th 2019 I bought 200 lots in the EURUSD at 1.1050 according to this trading recommendation “EURUSD Fundamental Analysis – August 29th 2019”. The margin requirement was $44,054 with a pip value of $2,000. On September 3rd 2019 I added 400 lots at 1.0950 for a margin requirement of $88,108 with a pip value of $4,000. Earlier today I closed my EURUSD long position at 1.1010 for a profit of $160,000. Also on August 29th 2019 I bought 200 lots in the NZDJPY at 66.800 for a margin requirement of $25,439 with a pip value of $1,882.37. I acted on this trading recommendation “NZDJPY Fundamental Analysis – August 29th 2019”. On August 30th 2019 I bought 200 lots in the GBPCAD at 1.6200 according to this trading recommendation “GBPCAD Fundamental Analysis – August 30th 2019”. The margin requirement was $48,644 with a pip value of $1,502.08. On September 3rd 2019 I added 400 lots at 1.6000 for a margin requirement of $97,287 with a pip value of $3,004.15. Today, September 4th 2019, I closed my GBPCAD long position at 1.6200 for a profit of $600,830. The three charts below show my closed EURUSD trade, my open NZDJPY position and my closed GBPCAD trade.
On September 2nd I added to my short Japanese Yen trades by buying 200 lots in the AUDJPY at 71.400 for a margin requirement of $27,150 with a pip value of $1,882.37. The original trading recommendation can be found at “AUDJPY Fundamental Analysis – September 2nd 2019”. On September 3rd 2019 I bought 200 lots in the AUDUSD at 0.6700 according to this trading recommendation “AUDUSD Fundamental Analysis – September 3rd 2019”. The margin requirement was $27,150 with a pip value of $2,000. The two charts show my long AUDJPY and AUDUSD positions.
Here is the summary of my Bitcoin - Forex Combo portfolio: I hodl 500 Bitcoins worth $5,238,050, 40,000,000 Ripple worth $10,036,000 and 20,000 Litecoin worth $1,336,200 plus a total cash portfolio worth $8,337,370. In addition I have the following forex positions in my portfolio: a 200 lots EURJPY long position worth $84,069, a 200 lots NZDJPY long position worth $157,205, a 200 lots AUDJPY long position worth $155,151 and a 200 lots AUDUSD long position worth $199,150. My total Bitcoin - Forex Combo portfolio is worth $25,543,195, up $1,483,798 from last week’s balance of $24,059,397 and at a new all-time high. Silver came through in a big way and my forex trades boosted my profits further which allowed me to increase my cash balance. Are you ready to grow your account? Take your first step now, open your own PaxForex Trading Account today and follow my Bitcoin - Forex Combo Strategy! Comment below with any questions you may have and I will be happy to help you get started!
WHY TRADE WITH PAXFOREX?
We are one of the fastest growing Forex Brokers in the Market. Trade with PaxForex to get the full Forex Trading experience which is based on...