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Crypto Regulation in Portugal

For those wishing to register a company to engage in cryptocurrency activities in Western Europe, it will be helpful to find out what principles of the regulation of virtual currencies are in Portugal. Blockchain technology and virtual currencies are under intense scrutiny by the Portuguese government and relevant regulators in the fintech industry, along with the prevailing trends in the fintech sector in other jurisdictions. In recent years, technology has attracted public attention due to the rise in the value of bitcoins, the growth in the number of initial coin offerings (ICOs) around the world, and their market capitalization. This emphasis is due to some of the significant changes that the Regulation of Virtual Currencies in Portugal has seen in recent years in the economic sector. First, we are talking about the growth of technology companies and the use of Portugal crypto in the last decade.

The most recent institutional changes include the approval of a ministerial resolution of March 5, 2020, establishing framework principles for the regulation of virtual currencies in Portugal and creating a regulatory sandbox, defining the structure of the digital mission and the main objectives of the Portuguese digital agenda. The regulation of virtual currencies in Portugal does not recognize them as legal tender. Cryptocurrency Portugal is not considered fiat currency or treated as physical or electronic money. In this regard, the European Banking Authority, in its report dated January 9, 2019, identified restrictions on when virtual currencies can be considered electronic money. Thus, virtual currencies are not supported by the government of the state and Banco de Portugal – the Central Bank of Portugal.

The regulation of virtual currencies in Portugal sees them in a different light in terms of functionality. In this context, other types of tokens have been recognized, such as utility and security tokens, commonly sold through ICOs. In 2018, the government issued a token – GOVTECH used to vote by distributing tickets among competing projects, replicating the investment choice in a government-sponsored technology competition.

AML Requirements

Cryptocurrency service firms are subject to the general AML framework for non-financial organizations. Such entities must, inter alia:
  • monitor money laundering and terrorist financing risks arising from the development or use of new technologies;
  • exercise due diligence in business relationships, one-time transactions, or ongoing customer transactions;
  • develop and implement policies, procedures, and controls to manage money laundering risks;
  • identify customers and business owners (through the KYC procedure);
  • collect and store information about business relationships with customers;
  • analyze and carefully review transactions based on risk assessment;
  • notify the competent authorities of suspicious transactions and cooperate with them.
High AML risks are traditionally associated with specific categories of people:
  • individuals and organizations operating in offshore zones;
  • “politically exposed persons” (including “immediate family members” and “persons with recognized and close relationships of a corporate or commercial nature”);
  • individuals and organizations that are on the sanctions lists of the UN Security Council, OFAC (Office for Foreign Assets Control of the US Department of the Treasury), the EU Council, and so on;
  • persons and organizations specified in the decisions issued by the sectoral authorities to take enhanced due diligence measures.

ICO Rules

Despite the fact that there are no specific laws in Portugal that could fully regulate cryptocurrency companies (ICOs). However, launching an ICO in Portugal may be subject to EU law, for example:

  • The relevant European Union directive may regulate the market for financial instruments.
  • The 2009 Directive regulates the regulation of market abuse.
  • Additional
  • Investment Fund Directive (OIF).

In addition, cryptocurrency transactions are further regulated and controlled by national and EU laws that are associated with any digital currency, such as:

  • Transfer, representation, or issue of securities;
  • Public Offer (if applicable);
  • Marketing related to digital currency.

Also, it is worth adding that ICOs can qualify as public offers. In this case, CIM further clarifies that a prospectus must be drawn up and submitted, along with any ICO marketing materials, for CIM’s approval. At the same time, it is necessary to adhere to all obligations to prepare the project without exception.

Taxation of Cryptocurrency Companies in Portugal

There is no special regime in Portugal regarding the tax treatment of cryptocurrencies. However, the tax authority issued three rulings regarding cryptocurrencies. These rulings are significant in the absence of other laws and crypto regulationsthat could clarify the taxation regime for cryptocurrencies. They will serve as precedents for how the Portuguese tax authority will treat cryptocurrencies and crypto-related activities when interpreting existing tax provisions. and deciding whether a specific fact or action should be subject to Portuguese tax (corporate, individual, VAT, or stamp duty).

 

In official rulings of 2019, the Portuguese Tax Authority confirmed the precedent of the Court of Justice of the European Union (Case C-264/14), according to which cryptocurrencies such as bitcoin are exempt from tax under the VAT exemption rules, which should be the same for all member states EU, taking into account the existing VAT harmonization in the EU. Companies that provide services related to cryptocurrencies are subject to capital gains tax at 28 to 35%.

How to Open a Crypto Company in Portugal

Portugal is implementing various ways to slightly adapt to the world and introduce cryptocurrency technologies into different areas of life. Undoubtedly, this approach makes Portugal one of the most crypto-friendly countries, so it deserves your attention. If you plan to create a company that will provide services related to digital currency. It refers to the issuance, holding, or trading of coins. This also applies to any exchanges and even companies that provide advice in this area. Benefits include attractive tax breaks and incentives for residents. Statistics say that Portugal is ranked 39 out of 190 countries in the World Bank’s Ease of Doing Business 2019 ranking, which indicates a reasonably favorable business environment (based on the ease of starting and financing a company and participating in economic activities). The future entrepreneur can take part in the web summit that takes place in Lisbon. The Commercial Companies Law regulates all companies in Portugal. This law contains clarifications regarding the registration of various types of organizations, management, and rights of shareholders. The Commercial Registry of Portugal maintains the public register of Portuguese companies. Additionally, cryptocurrency companies must obtain a license from Banco de Portugal.

Benefits of a Cryptocurrency License in Portugal

Companies choose Portugal for conducting activities related to digital assets due to many advantages:
  • Lack of requirements for the minimum authorized capital.
  • You can buy real estate byobtaining a cryptolicense.
  • There are no restrictions regarding the declaration of cryptocurrency assets.
  • No income tax from digital currency.

Types of Portuguese Legal Entities

If you create a company that will work with digital currencies, then there are two ways to implement this idea. In the first case, you can register a private limited company (Lda) and a public limited company (SA) in the second. In both cases, all company shareholders are liable solely to the extent of their original capital. For any company, the following general rules apply regarding initial contributions, registration, and filing of documents. First, each company must fully implement quality control concerning money laundering and terrorist financing. You can read more about each type of company below in the review.

Private Limited Company (LDA)

This is the most common business structure in Portugal. Since the transfer 

crypto
of  shares is limited, this structure is usually chosen to create small and medium-sized businesses. The company’s name may contain an arbitrary word naming or somehow indicate the company’s activities or links. The abbreviation Lda is added to the company name. In addition, this type of organization has two shareholders and one Director, who must be a resident of Portugal. There are no requirements for capital and the number of employees. However, an accountant must be appointed to oversee all financial transactions. However, there are limits that a company must not exceed:
  • Income should not be more than a million euros
  • The company’s bank account must have no more than 1.5 million euros
If one of the limits has been exceeded, the company must appoint an independent auditor to conduct the audit. If the limits are exceeded for more than two consecutive years, the company must reclassify as a Public Limited Company.

Public Limited Company (SA)

Large companies choose this type of entrepreneurial activity. In this case, entrepreneurs have the opportunity to attract more investors as well as accumulate colossal capital. However, there are higher requirements for this type of company than for private companies. The main features of a joint-stock company (JSC):

  • The company must have at least five shareholders and one director. If the share capital exceeds 200,000 euros, there must be two directors. Two shareholders are sufficient if the state is one of the shareholders.
  • The minimum capital of the company is at least 50,000 euros.
  • The minimum nominal value of a share is 0.01 euros.

An annual audit is mandatory for every public company, regardless of size and authorized capital. The company must independently appoint an auditor or supervisor who will monitor the company’s limits, as well as check the company’s policy regarding money laundering. Please note that the auditor can be an individual who is registered with the Association of Accountants in Portugal.

Reporting Requirements in Portugal

Of course, any company needs to keep records. Crypto companies are no exception. Every year, private and public companies must submit an approved financial statement to the Portuguese Commercial Registry. In addition, any interested person may need the following list of documents:
  • Annual report
  • Audit report
  • Opinion of the Supervisory Board
All reports must contain the following information:
  • Changes since the end of the financial year.
  • Prospects and forecasts of the company.
  • The evolution of the company, as well as the number and nominal value of quotas.
Suppose you are planning to register a company and are afraid of document difficulties. In that case, there is an opportunity to turn to companies that provide legal advice. leo.

FAQ

Yes. Despite the fact that there are no separate laws governing the cryptocurrency industry in Portugal, there are very loyal laws regarding any business. In addition, the crypto world is developing in Portugal, and digital currency is being introduced into common areas, for example, for buying real estate.

Yes. You can purchase and exchange cryptocurrency, as well as make purchases in exchange for digital currency.

Yes. You can read more about taxes paid by the company above.

In Portugal, no laws could fully regulate this direction of the crypto industry.

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