The Bitcoin family moves to Portugal, a tax haven for cryptos
‘Bitcoin Family’ in Lisbon, Portugal
Didi Taihuttu, patriarch of the so-called “Bitcoin family,” has his roots in Portugal, the ultimate crypto tax haven in Europe.
Settling down is a big deal for the Dutch family of five, who have traveled the world for the past five years. But after spending time in 40 countries, Portugal – which is one of the last places in Europe with a 0% tax on bitcoin – was simply too attractive a destination to ignore.
“You don’t pay any capital gains tax or anything else in Portugal on cryptocurrency,” Taihuttu said. As long as you don’t earn cryptocurrency for providing services in Portugal, you’re in the clear.
“It’s a very beautiful bitcoin paradise,” he said.
In 2017, Taihuttu, his wife and three children liquidated everything they owned, trading a 2,500 square foot home and virtually all of their earthly possessions for bitcoin and a life on the road. This was back when bitcoin price was around $900. The world’s largest cryptocurrency is currently trading around $41,000 after peaking at around $69,000 in November.
While the Taihuttu contingent won’t divulge the exact size of their crypto nest egg, the 43-year-old father of three says he protects the family’s crypto fortune in secret vaults on four different continents, so presumably their stake crypto is substantial enough to make it worth having to fly around the world to redeem their decentralized money.
With this type of crypto stake, the tax advantages in Portugal are certainly a big draw, although it doesn’t hurt that the country offers a safe and enjoyable way of life. In 2021, the country ranked fourth on the Global Peace Index, and it tops the list of best countries for expats.
The Bitcoin family is not the only one to settle in the Iberian Peninsula. The 2021 population census in Portugal shows that the number of foreign residents in Portugal has increased by 40% over the last decade.
Taihuttu’s siblings could also make the move. Didi’s brother and sister sell their houses and invest that money in bitcoin.
“We will all travel together as one big bitcoin family, which is, of course, really cool,” Taihuttu said.
0% bitcoin tax
Unlike the United States, which treats virtual currency as property, taxing it the same as stocks or real estate, Portugal considers cryptocurrencies as a form of payment. This distinction changes the situation in terms of taxation.
“Capital gains from crypto transactions such as cashing in and crypto-to-crypto exchanges are not subject to personal income tax,” explained Shehan Chandrasekera, CPA and head of the firm’s tax strategy. CoinTracker.io crypto tax software.
This means that, as with other fiat currencies, gains from buying or selling cryptocurrency are not taxed. This also means that crypto transactions or payments, as well as the exchange of bitcoins for fiat currency, are not subject to value added tax, or VAT.
“It makes Portugal a really attractive place for crypto users,” Chandrasekera continued.
The only exception to the country’s generous crypto program are companies registered in Portugal that deal in crypto. These businesses are subject to taxes under certain circumstances.
“If you earn cryptocurrency by providing services in Portugal, you have to pay a tax on these cryptocurrencies, but I don’t earn anything, at the moment, in Portugal. So for me it’s 0% d ‘tax,’ Taihuttu said.
“Bitcoin family” in Lagos, Portugal
Taihuttu says the process of establishing the residence for the family was relatively smooth and didn’t require jumping through very many hurdles.
For example, even though they own no property, Taihuttus are still considered official residents of Portugal. And unlike other tax havens like Puerto Rico, they are not required to spend a certain number of days in the country.
European Union citizens have the right of permanent residence in Portugal, and for non-EU citizens, Portugal offers expats a few pathways to residency, including the golden visa and the D7 visa (also known as the Retirement Visa or Passive Income Visa), both of which tend to attract wealthy foreigners.
The Portuguese Golden Visa is granted to those who buy a property and/or invest a certain amount of money in the country.
There are also steps that involve obtaining a tax identification number, opening a bank account and applying for formal residency. Companies like Plan B Passport streamline the application process for expats.
“We don’t need to be there, and that’s the good part. There’s no minimum requirement to stay a day in Portugal, so it’s an easy setup,” said Taihuttu, who was based in the Netherlands with his family before starting a life on the road.
CEO Katie Ananina told CNBC the company has helped hundreds of people from countries like the US, UK, Australia and Canada get a second passport in one of seven countries, including Portugal. The Plan B passport works in tandem with each government’s residency or citizenship-by-investment programs.
“It’s basically a donation to the country’s sustainable growth fund,” Ananina said. “So clients donate $100,000 or $150,000, plus due diligence fees, government fees, and then $20,000 for my legal fees.”
Puerto Rico easier for US citizens
Moving to Portugal for tax-free crypto life is not that simple for Americans.
“If a taxpayer has a green card, is a U.S. citizen, or is a U.S. resident alien, the taxpayer owes U.S. tax on any crypto earnings they have, regardless of where the crypto or the taxpayer is located,” explained Jon Feldhammer, a partner. at the Baker Botts law firm and former IRS lead litigant.
“It also doesn’t matter if they have dual citizenship; if they’re US citizens, they owe US tax on their worldwide income,” Feldhammer continued.
Prospective emigrants should also note that the United States charges citizens a fee for release.
“When a U.S. taxpayer expatriates, they are generally subject to the “exit tax,” which is essentially a tax equal to what the taxpayer would be subject to if they sold all of their property the day before leaving his citizenship,” according to Feldhammer.
That’s why many US passport holders instead stay closer to home and head south to Puerto Rico, a US territory that offers significant tax savings to eligible residents.
In the US, investors pay up to 37% on short-term capital gains and up to 20% on long-term gains, which applies to cryptos and other assets held for more than a year. year. One of the island’s tax breaks under Law 60, known as the Individual Investors Act, reduces this tax liability to zero if certain conditions are met. This is especially important for entrepreneurs and crypto traders.
There is also a major tax incentive for business owners to set up shop in Puerto Rico.
Continental corporations are subject to a federal corporation tax of 21%, plus a state tax, which varies. If a company exports its services out of Puerto Rico, the United States or really, anywhere else, it pays a corporate tax rate of 4%.
Expat life in Portugal
Wout Deley – who has been studying cryptocurrencies and their underlying technology since 2013 – was working as an international sales manager for a galvanizing company in Ghent, Belgium when he decided to sell his house, invest in chips, then hit the road.
After a few months traveling around Europe during the first days of the Covid pandemic, he finally settled in Portugal.
Similar to the Taihuttus, Deley sold his house, invested two-thirds of the money in cryptocurrency, and then lived off the final third.
“At any given time, I may have – at most – 10,000 euros ($11,450) in my bank account,” Deley said. “Everything else is still in crypto.”
For Deley, establishing his residence in Portugal was obvious.
“Cryptocurrencies in Belgium are massively taxed, and I was looking at seven figures of profit,” continued Deley, who said he would have faced a nearly 40% tax liability had he stayed in Belgium.
“Want to double your profits? Just move to Portugal,” he said.
Deley is in Lagos, which is located at the southwestern tip of Portugal. He says he found a villa available for long-term rental that was “very cheap”, and that was enough to establish his residence.
Life is easy in Portugal, according to Deley, who says the Algarve offers the benefits of Los Angeles – a warm climate and good surfing – but without the traffic jams. There is also a solid social scene.
“It’s full of expats. It’s just heaven,” continued Deley, who says he knows at least three bitcoin billionaires who live nearby – plus at least twelve other people (mostly from the UK). who are moving to Portugal in the next few months for crypto tax benefits.
Deley doesn’t speak Portuguese, but he says that’s no problem because everyone speaks English. He is also surrounded by many like-minded crypto investors.
“Everybody has a cryptocurrency here. Everybody knows bitcoin. Everybody has it,” he said.
Deley thinks the migration of crypto investors is also good for Portugal.
“They have a huge brain drain. Young people are leaving. So they’re trying to be more open to people with capital, digital nomads,” Deley continued.
Meanwhile, the Taihuttus tell CNBC they want to disrupt the typical expat experience in Portugal by building their own crypto village.
Didi Taihuttu in Lagos, Portugal
The family is currently looking for a property. They narrowed down their options to three different plots of land (one as large as 250,000 acres) along the country’s southern coast in the Algarve.
The plan is to run the community in a decentralized way, in which land is divided by square meter and sold in non-fungible tokens, or NFTs, to signify ownership.
Taihuttu also wants to mine bitcoin with solar and wind power, then use the heat produced by the rigs to heat homes in the winter, in a sort of closed-loop system.
The work plan, for now, is to use a Decentralized Autonomous Organization, or DAO, to govern the community. DAOs run on blockchain technology.
“We want to build a decentralized way of life, which is the future,” he said.