Brazil Crypto News: Brazil Too Soon Introduce Tax on Crypto Profits, Will This Impact Adoption?

Brazil To Soon Introduce Tax on Crypto Profits, Will This Impact Adoption?

November 30, 2023

Bhushan Akolkar

Senior Journalist

Expertise : Cryptocurrency, Blockchain, Macro Finance

Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets.   He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.

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New income tax rules approved by the Brazilian Senate may require Brazilians to pay up to a 15% tax on income from cryptocurrencies held on foreign exchanges.

The bill, having already passed in the Chamber of Deputies, is anticipated to be approved by President Luiz Inácio Lula da Silva, who initiated the income tax rule changes.

Brazil and Crypto Tax Rules

Effective January 1, 2024, the tax applies to any Brazilian earning over $1,200 (6,000 Brazilian reals) on foreign exchanges, aligning their tax rate with funds held domestically. Upon access, funds earned before this date will incur a tax rate of 8% for earnings accessed before December 31.

Note that this is the crypto profit derived by trading on foreign exchanges. This rule isn’t applicable to expats leaving in Brazil with no residency status.

If you are a tax resident in Brazil and own an offshore company or trust, taxes are only applicable when the entity distributes profits to you. Any funds retained abroad remain exempt from taxation. However, if you are a tax resident in Brazil and own an offshore company or trust, you will be subject to individual taxes on any profits attributed to you, regardless of whether they are distributed.

Fortunately, you are misunderstanding this

Brazil 🇧🇷 is not taxing people regardless of residency

What changes with PL 4173/23:

CURRENTLY: Tax-deferral

If you own an offshore company or trust while being a Brazil tax resident, you only pay tax when it distributes profits to… https://t.co/iiG1YyVUr9

— BowTiedGlobe | Your Freedom Dealer (@BowTiedGlobe) November 29, 2023

Furthermore, the legislation also impacts “exclusive funds,” referring to investment funds with a single shareholder, as well as foreign companies operating in the Brazilian financial market. The government aims to generate $4 billion (20.3 billion Brazilian reals) in revenue in 2024. Senator Rogério Marinho expressed his dissenting opinion on the bill.

“The government is creating a tax because it is a poor manager,” he said.

Initiating Regulatory Measures

In September, Roberto Campos Neto, the governor of Banco Central do Brasil, unveiled intentions to enhance cryptocurrency regulations due to a significant surge in its popularity within the country. During this announcement, he expressed concerns about the potential use of crypto for tax evasion.

In June, the Brazilian central bank gained authority over virtual asset service providers, while crypto-based securities are overseen by the Comissão de Valores Mobiliários, the Brazilian equivalent of the United States Securities and Exchange Commission.