The Portuguese Tax Authority (PTA) has done what only a few other countries have done. It has created a framework that defines a handful of taxes for cryptocurrencies, helping to provide a great amount of clarity on the murky subject. The push for the guidelines came from an unidentified company, possibly in the utility sector, which was looking to launch an initial coin offering (ICO) and a token built on top of Ethereum network.

The company opened discussion with the PTA, seeking guidance on whether or not its token was covered by value added tax (VAT) exemptions similar to what are offered for legal tender. The PTA announced (in Portuguese) that transactions that contain a token could, in principle, be considered as a critical transfer of goods. To that end, the tokens should have VAT liability. However, the PTA also acknowledged that the digital coins could be eligible for the legal tender VAT exemption. The PTA explained that the exemption would only be applicable in instances where the transfer of the tokens occurs in an alternate form of payment. This means that yes, the tokens most likely would be exempt, provided they are exchanged using a defined legal currency.

Since the VAT system is used among all of the European Union (EU) member states, the decision by the PTA, in its estimation, is valid for all of the EU states. This is consistent with a recent decree by the European Court of Justice (ECJ), which established that an exchange of legal tender for cryptocurrency—as well as cryptocurrency for legal tender—was equal to the supply of services as defined by the VAT directive. The ECJ further revealed that, for its purposes, cryptocurrency has no purpose other than being a method of transacting a payment.

A previous tax ruling in Portugal already defined income tax exemptions for the sale or purchase of cryptocurrencies. According to that ruling, since there is no income category covering cryptocurrency gains, there is no requirement to include them when filing individual tax income statements. While the VAT discussion spans across virtually all of the EU, the PTA’s stance on individual cryptocurrency gains taxes applies to Portuguese filers.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.