Didi Taihuttu, patriarch of the so-called “Bitcoin Family,” says the family is setting down roots in Portugal, Europe’s ultimate crypto tax haven.
Settling down is a big deal for the Dutch family of five, who have travelled the world for the last five years. But after they spent time in 40 countries, Portugal – which is one of the last places in Europe with a 0% tax on bitcoin – was just too enticing a destination to ignore.
“You don’t pay any capital gains tax or anything else in Portugal on cryptocurrency,” said Taihuttu. As long as you don’t earn cryptocurrency for providing services in Portugal, you’re in the clear.
“That’s a very beautiful bitcoin heaven,” he said.
In 2017, Taihuttu, his wife and three kids liquidated all they owned, trading a 2,500-square-foot house and virtually all their earthly possessions for bitcoin and a life on the road. This was back when the price of bitcoin was around $900. The world’s biggest cryptocurrency is currently trading around $41,000 after peaking at about $69,000 in November.
The Taihuttu contingent won’t disclose the exact size of their crypto nest egg. But Taihuttu says he safeguards the family’s crypto fortune in secret vaults on four different continents, so presumably their crypto stake is substantial enough to make it worth having to fly across the globe to redeem their decentralized cash.
With that kind of crypto stake, the tax perks in Portugal are certainly a big draw, though it doesn’t hurt that the country offers a safe and pleasant 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 isn’t alone in making the move to the Iberian Peninsula. The 2021 population census in Portugal shows that the number of foreign residents increased by 40% in the last decade.
Taihuttu’s siblings may also make the move. His brother and sister are selling their houses and investing that cash into bitcoin.
“We will all be traveling together as one big bitcoin family which is, of course, really cool,” said Taihuttu, 43.
0% tax on bitcoin
Unlike the U.S., which treats virtual currency as property, taxing it in a manner similar to stocks or real property, Portugal views cryptocurrencies as a form of payment. That distinction is a game-changer with respect to taxes.
“Capital gains resulting from crypto transactions such as cashing out and crypto-to-crypto trades are not subject to personal income taxes,” explained Shehan Chandrasekera, a CPA and head of tax strategy at crypto tax software company CoinTracker.io.
This means that gains from buying or selling cryptocurrency, as with other fiat currencies, are not taxed. It also means that crypto transactions or payments, as well as the exchange of bitcoin for fiat money, are not subject to a value-added tax, or VAT.
“This makes Portugal a really attractive place for crypto users to live,” Chandrasekera said.
The only exception to the country’s generous crypto scheme relates to companies registered in Portugal that deal in crypto. These businesses face some taxes under certain circumstances.
“If you earn cryptocurrency by providing services in Portugal, you need to pay tax on those cryptocurrencies, but I don’t earn anything, at the moment, in Portugal. So for me, it’s 0% tax,” said Taihuttu.
Taihuttu says the process of establishing residency for the family was relatively smooth and didn’t require jumping through very many hoops.
For example, even though they don’t own any property, the Taihuttus are still considered official residents of Portugal. And unlike other crypto tax havens, such as Puerto Rico, they aren’t required to spend a certain number of days there.
“We don’t need to be there, and that’s the beautiful part. There’s no minimum requirement of staying a day in Portugal, so it’s an easy setup,” said Taihuttu, who was based in the Netherlands with his family before they began a life on the road.
Citizens of the European Union have the right to permanent residence in Portugal, and for non-EU citizens, Portugal offers expats a few paths 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 given to those who buy property, and/or invest a certain amount of money in the country.
There are also steps that involve getting a tax identification number, opening a bank account, and formally applying for residency. Companies such as Plan B Passport streamline the application process for expats.
CEO Katie Ananina tells CNBC the company has helped hundreds of people from countries such as the U.S., the U.K., Australia and Canada obtain a second passport in one of seven countries, including Portugal. Plan B Passport works in tandem with each government’s residence- or citizenship-by-investment programs.
“It’s basically a donation into the sustainable growth fund of the country,” said Ananina. “So, clients make a $100,000 or $150,000 donation, plus some due diligence fees, government fees, and then $20,000 for my legal fees.”
Puerto Rico easier for U.S. citizens
Moving to Portugal for the tax-free crypto life isn’t so 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 gains they have no matter where the crypto or the taxpayer is located,” explained Jon Feldhammer, a partner at law firm Baker Botts and a former IRS senior litigator.
“It also doesn’t matter if they are dual citizens; if they are U.S. citizens, they owe U.S. tax on their worldwide income,” Feldhammer said.
Would-be emigrants should also note that the U.S. charges citizens a fee to cut loose.
“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 they gave up their citizenship,” Feldhammer said.
That’s why many U.S. passport holders are instead sticking closer to home and heading south to Puerto Rico, an American territory that offers significant tax savings to qualifying residents.
In the U.S., investors pay as much as 37% on short-term capital gains and up to 20% on long-term gains, which applies to crypto and other assets held for more than a year. One of the island’s tax breaks under Act 60, known as the Individual Investors Act, drops that tax obligation down to zero if certain qualifications are met. This is especially significant for entrepreneurs and crypto traders.
There is also a major tax incentive for business owners to set down roots in Puerto Rico.
Mainland companies are subject to a 21% federal corporate tax, plus a state tax, which varies. If a firm exports its services out of Puerto Rico, to the U.S. or really, anywhere else, they pay a 4% corporate tax rate.
Portugal’s expat life
Wout Deley — who has been researching cryptocurrencies and their underlying technology since 2013 — was working as an international sales manager for a galvanization company in Ghent, Belgium, when he decided to sell his house, invest in tokens and then hit the road.
After a few months traveling through Europe during the early days of the Covid pandemic, he ultimately settled down 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 have maybe — at a maximum — 10,000 euros ($11,450) in my bank account,” said Deley. “All the rest is always in crypto.”
For Deley, establishing residency in Portugal was a no-brainer.
“Cryptocurrencies in Belgium are massively taxed, and I was looking at seven figures of profit,” said Deley, who said that he would have faced a tax obligation of close to 40% had he remained in Belgium.
“You want to double your profit? Just move to Portugal,” he said.
Deley is in Lagos, which is located in the southwest tip of Portugal. He says that he found a villa available as a long-term rental which was “very cheap,” and that was enough to establish residency.
The living is easy in Portugal, according to Deley, who says the Algarve offers the perks of Los Angeles — a warm climate and great surf — but without the traffic jams. There is also a solid social scene.
“It’s full of expats. It’s just paradise,” continued Deley. He says that he knows of at least three bitcoin billionaires who live nearby — plus another 12 people at least, mostly from the U.K., who are moving to Portugal in the next few months for the crypto tax benefits.
Deley doesn’t speak Portuguese, but he says that’s not a problem, because everyone speaks English. He is also surrounded by a lot of like-minded crypto investors.
“Everyone has cryptocurrency here. Everyone knows bitcoin. Everyone has it,” he said.
Deley says the crypto investor migration is good for Portugal, too.
“They have a huge brain drain. Younger people are leaving. So they’re trying to be more open to people with capital, digital nomads,” said Deley.
Meanwhile, the Taihuttus tell CNBC they want to disrupt the typical expat experience in Portugal by building their own crypto village.
The family is currently shopping for real estate. They’ve narrowed their options down to three different plots of land, one as big as 250,000 acres, along the country’s southern coastline in the Algarve.
The plan is to run the community in a decentralized fashion, in which the land is divvied up by the square meter and sold as non-fungible tokens, or NFTs, in order to signify ownership.
Taihuttu also wants to mine for bitcoin with solar and wind power and then use the heat produced by the rigs to warm houses in the winter, in a sort of closed-loop system.
The working 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 lifestyle, which is the future,” he said.
Article from CNBC