Obtaining a crypto license in Portugal

In 2020 and 2021, analysts called Portugal the most friendly country in Europe for cryptocurrency and digital nomads. In addition to privately benefiting from crypto assets, registering a crypto company in Portugal has many advantages. Such a business can be fully incorporated into the legal framework by obtaining the necessary permission from the state regulator.

 

Lawrange Law Firm provides a range of services for the effective start of a cryptocurrency business in Portugal … Our team undertakes a significant amount of work on the preparation of documentation, both for registering a company and opening a bank account, and for complying with AML requirements in accordance with Portuguese law. We are ready to start the implementation of the action plan for the design of your crypto project immediately!

 

Government regulation of cryptocurrency business in Portugal

The Portuguese government has managed to create a favorable investment climate for IT activities, which has led to an increase in the number of companies in this area and the wider use of cryptocurrency in the last decade. Profits received by individuals from investing in cryptocurrencies are not taxed.

 

Important! The commercial activity of issuing and trading virtual currencies in Portugal is not illegal or prohibited. However, any transactions with crypto assets are controlled only for the purpose of preventing money laundering and AML / CFT terrorism financing. Cryptocurrencies are not considered legal tender.

 

At the same time, in 2018, the Portuguese government, as part of the GovTech technology competition, in fact released a cryptocurrency that was used for voting. Virtual currencies gradually began to attract more and more attention from regulatory bodies – Banco de Portugal, the Securities and Exchange Commission (Comissão do Mercado de Valores Mobiliários, CMVM) and the Authority of Insurance and Pension Funds (Autoridade de Supervisão de Seguros e Fundos de Pensões, ASF) .

 

On March 5, 2020, the Portuguese government took an important step towards creating an enabling environment for cryptocurrency startups. The corresponding decree established the framework principles for the creation of the Portuguese normative (regulatory) “sandbox” (from the English. Regulatory Sandbox). This is a special legal regime for legal entities working in the FinTech field and developing new products. This mode makes it possible to test such developments in a limited environment without the risk of violating the current legislation.

 

Important! The turning point in government regulation of crypto business in Portugal was implementation of the Fifth EU Directive 2018/843 into national legislation to combat money laundering and terrorist financing in the crypto asset ecosystem (AMLD5). The transfer of the requirements of the Fifth Directive was made by the adoption of Law 58/2020 . On August 31, 2020, this regulation was published in the Diário da República. This law amended Law No. 83/2017 of August 18, 2020, known as the “Law on Combating Money Laundering and the Financing of Terrorism” (“ AML / CFT Law “).

 

Definition of “virtual assets”

The AML law uses the term “virtual assets” rather than the narrower concept of “virtual currency” as in AMLD5.

 

Note! Virtual assets are defined by this law as a digital representation of value, which is not necessarily tied to a legally established currency and does not have the legal status of fiat currency, but is accepted by individuals or legal entities as a medium of exchange or investment, can be transferred, stored electronically.

 

This definition implies that crypto assets do not legally qualify as electronic money.

 

For your information! In turn, electronic money – electronically stored monetary value used to carry out payment transactions.

 

What types of crypto businesses are subject to government regulation?

In the first place, state AML-regulation is focused on intermediaries . The purpose of such regulation is to monitor, detect and notify regulatory authorities about suspicious activity in the financial system. This approach remains unchanged for the activities of crypto companies, both in the EU and Portugal.

 

Important! The legislation defines the circle of obligated entities – legal entities whose activities in the cryptocurrency sphere are subject to the relevant state. regulation. Obliged subjects are mainly service providers through which access to and exit from the ecosystem of cryptoassets is carried out. Crypto asset users and miners are currently excluded from AML compliance verification mechanisms.

 

Obligated subjects are legal entities that provide the following types of services (one or more directions):

  1. services for exchanging virtual assets for fiat currencies and vice versa;
  2. services of exchanging one cryptocurrency for another;
  3. services for transferring virtual assets from one address or wallet to another;
  4. storage and administration services for virtual assets, or tools that allow you to control, own, store or transfer such assets, including encrypted private keys.

 

Main AML requirements for a cryptocurrency company

The service providers identified above are subject to the general AML framework for non-financial organizations. Such entities should, among others:

  • track money laundering and terrorist financing risks arising from the development or use of new technologies;
  • Exercise due diligence in business dealings, one-off transactions, or ongoing customer transactions;
  • develop and implement policies, procedures and controls to manage money laundering risks;
  • identify customers and business owners (via KYC procedure);
  • collect and store information about business relationships with customers;
  • analyze and thoroughly validate transactions based on risk assessment;
  • Notify and cooperate with competent authorities about suspicious transactions.

 

For your information! To identify suspicious transactions, use the generally accepted set indicators (trigger events) . In particular, we are talking about the “red flags” that are recommended by the FATF (Financial Action Task Force on Money Laundering). Among them:

  • indicators related to transactions: size, frequency and nature of transactions;
  • indicators related to anonymity;
  • indicators about senders and recipients: namely customer profiles and their violations;
  • indicators related to the origin of funds;
  • indicators related to geographic risks (counterparty jurisdictions).

 

High AML risks are traditionally associated with certain categories of persons:

  • persons and organizations working in offshore zones;
  • “politically exposed persons” (including, “close family members” and “individuals with recognized and close relationships of a corporate or commercial nature”);
  • persons and organizations included in the sanctions lists of the UN Security Council, OFAC (Office of Foreign Assets Control of the US Treasury), the EU Council, and so on ;
  • by individuals and entities identified in ordinances issued by industry authorities with a view to enforcing enhanced due diligence.

 

Banco de Portugal – the regulator of crypto activities in Portugal

From September 1, 2020, the country’s Central Bank (Banco de Portugal, BdP) took over the functions of the regulator of business activities in the field of virtual currencies. This competent authority carries out the registration of obligated entities, as well as further verification of compliance by these entities with the AML regime enshrined in Portuguese law.

 

At the same time, the responsibility of Banco de Portugal in relation to organizations that operate using virtual assets, ” Limited to ML / TF prevention and does not apply to areas of prudential, banking or any other nature “ (according to information from the official BdP website) …

 

Note! Banco de Portugal highlights the following main risks associated with cryptoassets:

  • virtual assets are not legal tender in Portugal, which means that it is not necessary to accept them at face value; < / li>
  • there is no legal protection for consumers using virtual assets to make payments, as opposed to regulated means of payment; </ li>
  • in the event of full or partial depreciation of virtual assets, there is no fund to cover losses incurred by users, so they have to take all the risks associated with using these tools;
  • Operations with virtual assets can be used illegally in criminal activities.

 

Subtotal: To obtain permission to conduct cryptocurrency activities for commercial purposes (crypto license ) in Portugal , the application should be submitted to the Central Bank. This is the main oversight body responsible for regulating crypto business in the country, and licensing crypto exchanges and cryptocurrency exchanges . For the approval of the application by BdP representatives, it is necessary as a matter of priority to comply with the AML requirements of this jurisdiction, as well as to fulfill a number of conditions.

 

For your information! Under the conventional names, a license for a crypto exchanger or a license for a crypto exchange in Portugal < / b> is meant rather to certify certain business entities. Such legal entities receive permission to conduct cryptocurrency business from Banco de Portugal after demonstrating the business model and AML compliance.

 

The procedure registration of a crypto company in Portugal in Banco de Portugal is distinguished by a large difficulty level. The regulator should submit a convincing business plan and also prove the liquidity of the project. In particular, it took almost nine months for the approval of the first two applications from applicants Banco de Portugal (applications were submitted in September 2020, and approved only in June 2021).

 

Taxation of cryptocurrency business

There are no specific provisions on cryptocurrency or cryptoasset tax in Portuguese tax legislation. However, the Portuguese Tax and Customs Authority (AT) issued a regulation on taxation of cryptocurrencies at the request of the taxpayer.

 

Based on this regulation, the current position of the Portuguese Tax and Customs Administration regarding the taxation of cryptocurrency is as follows: “Cryptocurrencies are not technically considered ‘currency’, legal tender. But they can be profitably exchanged for real currency using the services of the appropriate intermediary companies. The value of virtual currency in relation to real currency is determined by online demand. “ Thus, the AT position coincides with the position of the Central Bank of Portugal.

 

Considering the above, income from the sale of cryptocurrencies by individuals will not be subject to income tax, nor under category E (capital gains), nor under category G (increase in equity) .

 

Important! In accordance with the Portuguese tax system, profits from the sale of cryptocurrencies are not taxed. However, if the profits are regular, they will qualify as professional or entrepreneurial income, which will be taxed at a progressive tax rate, which can be up to 48%. In this situation, profits will be taxed as income falling under Category B.

 

Stages of registration of a crypto company in Portugal with the support of Lawrange

1. We register LDA (Limited Liability Company) or SA (Joint Stock Company).

Depending on the specifics of the project and the preferences of our client, there are two ways to register a business in Portugal:

 

Path one.

Create a Portuguese company with a base corporate income tax rate – 14.7% .

 

Second path.

We create a company with a license to operate in the Madeira Free Zone – International Business Center of Madeira (IBCM) with income tax – 5% </ b > .

 

2. We receive the status of a cryptocurrency organization.

Our package of services includes the collection, preparation and submission of all the necessary documents for registering a company with Banco de Portugal as a virtual asset service provider (VASP) with the authority to store and exchange cryptocurrency .

 

3. Opening a bank account.

The process of registering an invoice for a crypto company is not easy. The bank should be provided with a considerable amount of information. In particular, the directors and beneficiaries of the organization must be properly assessed by the bank.

 

*** Note: If a business entity is registered with IBCM, you must also go through the stage of submitting a license request to S.D.M. (Sociedade de Desenvolvimento da Madeira, S.A.).

 

Estimated time frame for the project for obtaining a crypto license in Madeira (in Portugal):

  • registration of a crypto organization and obtaining an IBCM license – from 4 to 5 weeks;
  • becoming a virtual asset service provider – 2 to 3 months;
  • opening a bank account – 3 to 4 weeks.

 

Cost of registering a cryptocurrency company

 

The cost of registering a crypto company in Portugal (in Madeira): 

  1. Registration with classic tax regime – 4950 EUR  including:

– company registration services + payment of the registration fee;

– preparation of constituent documents;

– tax and social security registration.

 

  1. Registration with low-tax IBCM mode – 7950 EUR  including:

– payment of registration fee + mandatory insurance premium IBCM;

– preparation of constituent documents;

– tax and social security registration;

– submit a request and obtain an IBCM license.

 

Extra paid:

– obtaining a Portuguese tax number (NIF) for the beneficiary and the director – 350 EUR for one year;

– legal address and postal service – 950 EUR for one year ;

– accounting support – from 350 EUR monthly ;

– subsequent support of the company – 1400 EUR for one year .

 

The cost of registration with Banco de Portugal (obtaining a crypto license), including the preparation of the necessary AML and KYC policies, is from 8500 EUR.

 

The cost of opening a bank account in Portugal is 2500 EUR.

 

Benefits of IBCM for a Crypto Company

 

The Autonomous Region of Madeira is fully integrated into the economic and political system of Portugal, but has its own tax and corporate legislation. The income tax of business entities is only 5%.

 

Important! Companies registered in Madeira in the IBCM mode can enjoy a reduced income tax rate until 2027, from extension until 2035.

 

In addition, dividend tax is 0% – the payment of dividends to non-resident shareholders of companies registered in Madeira under the IBCM regime is not taxed. Also 0% is taxation of income from subsidiaries. Capital gains or dividends received by a firm registered in Madeira under the IBCM regime from subsidiaries are not considered part of taxable profits (provided that the IBCM company directly owns at least 10% of the capital of the paying company during the year).

 

Requirements for licensing crypto-activity in Portugal

 

If you plan to successfully pass the Banco de Portugal check and get a state. the regulator’s permission for cryptocurrency business activities (the so-called “ crypto-license Portugal “), a number of conditions must be met: 

 

  1. Appoint an AML officer and local director (at least one of the directors must be resident in Portugal). </ li >
  2. Confirm the physical presence of the crypto firm in the country, first of all, by the presence of a local office with employees.
  3. Provide significant share capital.
  4. Define and update risk profiles related to customers, business relationships, casual transactions, and overall operations.
  5. Define solutions for KYC and subsequent customer monitoring.

 

As part of the preparation of AML policies and guidelines, a “risk matrix” should be created that identifies the specific ML / CT risks associated with:

  • with the nature, scale and complexity of the activity;
  • with clients;
  • with products, services and operations;
  • with distribution channels for products and services, communications used in contact with customers, and technological solutions;
  • with customers’ countries or territories of origin (jurisdictions).

 

List of required documents

 

For your information! The registration process for organizations that intend to carry out activities with virtual assets in Portugal is regulated by a special Banco Notice de Portugal # 3/2021 dated April 23, 2021.

 

Upon request “ crypto license Madeira ” with the support of experts from Lawrange JSC, a voluminous a package of documents, which are then attached to the completed forms received from Banco de Portugal. Forms (accompanied by appropriate supporting documentation) must be sent to Banco de Portugal in accordance with Article 6 (3) – (6) of Notice No. 3/2021.

 

The package of such documents includes:

  1. Articles of Association (draft bylaws or amendment to bylaws) with direct link to virtual asset operations.
  2. Certificado de admissibilidade – Certificate of Registration
  3. Certidão permanente – Certificate of Good Standing or equivalent.
  4. For all participants – passports or other identification documents.
  5. For all participants – a certificate of no criminal record (not older than three months) in Portugal or abroad for committing a crime punishable by imprisonment for more than six months, in the field:
    • money laundering;
    • corruption;
    • document forgery;
    • abuse of office.
  6. Confirmation of the absence in Portugal or abroad of initiated procedures with the aim of revoking, canceling, or terminating registration, authorization, admission or license to carry out a commercial, business or professional activities of the project participants.
  7. CV of participants to confirm the skills, qualifications and knowledge necessary to perform the relevant functions in the company, including:
    • biographical information with details of academic background and professional experience;
    • certificates confirming the attendance of the relevant courses or trainings;
    • other documents confirming professional competence and the ability to make informed and reasonable business decisions.
  8. An extensive and detailed business plan with a focus on proving the economic viability of the project and proving development prospects, as well as confirming the creation of a solid foundation for AML compliance. mode.
  9. Description of human, technical and material resources allocated for each type of activity with virtual assets, including a description of the IT infrastructure. < / li>
  10. Expert forecasts for the first three years of activity on the following characteristics:
    • the total volume of transactions for each of the virtual asset activities;
    • share of each provided service in the general list of company services;
    • number of deals and transactions;
    • planned geographic areas for promotion.
  11. Detailed information on the following issues:
    • the number of internal and external employees to ensure compliance with the AML / CFT rules;
    • virtual assets that will be available for sale;
    • all types of wallets, as well as the main characteristics of each of them;
    • types and methods of payment allowed.
  12. ML / CT prevention policy and procedures package: professionally prepared documents describing internal risk management policies in accordance with local legislation.
  13. Detailed information and documentation from a reputable and trustworthy source confirming the origin of the funds that will be used to deposit the share capital. </ li>

 

*** Note: AML policies must be tied to the specifics of the company’s specific operating activities, cover all business areas related to virtual assets. Documents should be prepared in a personalized and understandable manner.

 

Conclusions:

 

Registration of a crypto-exchanger in Madeira or another project in the field of virtual currencies, subject to legal support from representatives Lawrange JSC is a promising step. If the above conditions are met, the documentation is correctly prepared and the Banco de Portugal application is approved, the entrepreneur will be able to enjoy the IBCM tax benefits for a certain period of time and at the same time carry out cryptocurrency activities on a reliable legal platform.

 

If you are interested crypto exchange license in Portugal, you should prepare for an extended government review of your application. Additional requests for information and documents are quite possible. A quick and correct response to such requests will help to achieve the desired result. At the same time, all the way to the goal, registration a cryptocurrency company in Portugal , you will be accompanied by reliable assistants – experienced lawyers and attorneys of Lawrange JSC.

ORDER A CRYPTOLICENSE IN PORTUGAL