The Senate in Brazil has approved new regulations that propose a tax of up to 15% on profits made from cryptocurrencies held in exchanges outside the country. This significant development could set a precedent for distinguishing between local and foreign cryptocurrency exchanges.
Individuals living in Brazil will be subject to this tax if they earn income over $1200 (6000 Brazilian Reais) from exchanges abroad. Under the new legislative proposal, income earned from cryptocurrencies held in international exchanges will be equated with the tax rates applicable to local income.
This regulation, planned to be implemented starting from January 1, 2024, harmonizes the tax rates applied to foreign funds with those applied to domestic funds. Funds acquired before this date will be taxed when withdrawn by the owner. Additionally, gains from funds accessed before December 31 will be taxed at a rate of 8%.
The bill also includes “special funds” that cover single-shareholder investment funds and foreign companies operating in the Brazilian financial market. The government is expected to generate a revenue of 4 billion dollars (20 billion 300 million Brazilian Reais) in 2024 thanks to these tax regulations. However, despite the government’s targets, Senator Rogério Marinho criticized the move as poor management and expressed dissent.
This legal development occurred following Brazil’s increased regulatory scrutiny in the crypto environment. In June, Roberto Campos Neto, the President of Banco Central do Brazil, announced plans to tighten regulations, suspecting cryptocurrencies were being used for tax evasion. Additionally, in June, the Central Bank gained judicial authority over crypto asset service providers. Notably, securities based on cryptocurrencies are under the jurisdiction of Brazil’s equivalent to the US Securities and Exchange Commission, the Comissão de Valores Mobiliários.
While Brazil takes steps to adapt its regulatory framework to accommodate changes in the crypto environment, these new tax rules reflect a global trend of governments formalizing and standardizing crypto taxation. On the other hand, these developments should be seen as an opportunity to establish a legal foundation for the crypto space.