New Tax Rules for Brazilians Holding Crypto Abroad

Brazilians face potential taxation on foreign-held crypto, as the Brazil Senate approves new income tax rules.

Senate Approval and Potential Tax Rates

The Brazil Senate has greenlit income tax rules that could require Brazilians to pay up to 15% tax on crypto income from exchanges outside the country. This move, set to take effect on January 1, 2024, aligns the tax rate for foreign-held crypto with that of domestic income.

Threshold and Effective Date

The approved bill targets individuals earning over $1,200 (6,000 Brazilian reals) on non-Brazilian exchanges. Notably, funds earned before January 1, 2024, become taxable when accessed by the owner. Earnings on funds accessed prior to December 31 will incur an 8% tax.

Extended Impact on Investment Funds and Foreign Companies

The legislation also extends its reach to "exclusive funds" (investment funds with a single shareholder) and foreign companies involved in the Brazilian financial market. The government aims to generate $4 billion (20.3 billion Brazilian reals) in revenue in 2024 through these measures.

Opposition and Criticism

Despite the bill's progress, Senator Rogério Marinho expressed opposition, criticizing the government for creating a tax, attributing it to poor management. This dissenting voice highlights internal debates surrounding the taxation initiative.

Broader Regulatory Context

In September, the governor of the Banco Central do Brazil, Roberto Campos Neto, revealed plans to tighten cryptocurrency regulations due to its surging popularity, suspecting potential crypto use for tax evasion. The central bank gained authority over virtual asset service providers in June.

Regulation of Crypto-Based Securities

Crypto-based securities fall under the purview of the Comissão de Valores Mobiliários, Brazil’s equivalent of the United States Securities and Exchange Commission.

In conclusion, Brazilians may soon face increased taxation on foreign-held crypto as part of a broader government initiative to regulate and generate revenue from the growing cryptocurrency market.