The Brazilian Congress Wants to Increase Taxes on Cryptocurrencies
If passed, the law will subject crypto assets owned by Brazilians abroad to the same tax laws that apply to traditional assets.
Brazilian lawmakers are moving forward with a bill that would increase taxes on cryptocurrencies stored abroad. According to local reports, a congressional committee has approved changes to a bill recognizing cryptocurrencies as “financial assets” for tax purposes when it comes to foreign investment.
The bill also taxes profits derived from fluctuations in the prices of crypto assets against Brazil’s fiat currencies, as well as fluctuations in exchange rates. Merlong Solano said that the overhaul aims for equal tax treatment as crypto investments abroad currently receive reduced tax incentives.
Brazilians owning crypto assets abroad are subject to the same tax laws as those owning traditional assets.
Under the new rules, foreign earnings of up to 6,000 Brazilian rice (US$1,200) are tax exempt. Income between US$6,000 and US$50,000 (US$10,000) is taxed at a rate of 15%. Above this threshold, taxes are charged at 22.5%.The legislation states that the changes only apply to cryptocurrency companies without Brazilian branches. Legal experts say the new rules could make local exchanges more affordable for certain investors, particularly those whose earnings are above the maximum tax bracket. The law could also give a boost to the crypto exchange industry nationally and encourage foreign players to open offices in the country.
There are several global crypto exchanges in the country. These include Binance, Coinbase Bitso and Crypto.com, as well as local players such as Mercado Bitcoin and Foxbit.
The bill will be voted on in the Brazilian Congress on August 28th. The new taxation, if passed, would come into effect in 2024.
Crypto-related activities have increased rapidly in Brazil over the past few months. Recently, the Central Bank of Brazil announced that its core digital currency (CBDC) will be renamed Drex. The central bank will launch a tokenization program as part of the Drex launch to improve corporate access to capital.
