The Brazil Senate has recently passed legislation that will require Brazilian residents to pay up to a 15% tax on income generated from cryptocurrencies held on offshore exchanges. This new taxation rule is set to take effect from January 1, 2024.
Details of the New Tax Rule
The law, which applies to crypto users with assets exceeding R$6,000 (about $1,200) on all offshore exchanges, has already been approved by the Chamber of Deputies and the Senate’s Economic Affairs Committee. It awaits final approval from President Luiz Inácio Lula da Silva, whose administration initiated the proposal.
Classification of Crypto Assets and Tax Implications
Under the new bill, cryptocurrency assets and wallets on offshore platforms are classified as financial investments. This classification subjects them to taxation in line with the regulations of the Special Secretariat of the Federal Revenue of Brazil. The bill also impacts exclusive funds and offshore applications, which are companies investing in the Brazilian financial market.
Graduated Tax Rates Based on Access Time
Income on assets accessed before December 31, 2023, will be taxed at 8%, while funds earned before January will be taxed upon access. This graduated tax scale is a part of the transitional provisions of the new rule.
Expected Revenue from the Tax Implementation
The Brazilian government expects to raise significant revenue from this measure, with projections of R$20.3 billion ($4.1 billion) in 2024 and R$54 billion ($11 billion) by 2026. This is based on findings by Brazil’s central bank, which estimates Brazilians hold about R$200 billion (more than $40.7 billion) in offshore assets.
Opposition and Further Deliberations
The tax rule has faced opposition from some Senate members, with Senator Rogério Marinho criticizing the government’s approach. Despite proposals for changes to the bill by several deputies, these alterations have not yet been implemented.
Context of Crypto Regulation in Brazil
This development follows a decision made less than six months ago, empowering the central bank to supervise the local crypto sector alongside the Comissão de Valores Mobiliários, Brazil’s equivalent of the Securities and Exchange Commission.
The imposition of this tax represents a significant step in Brazil’s evolving approach to cryptocurrency regulation and taxation, reflecting a broader trend of governments seeking to incorporate digital assets into their fiscal frameworks.