Brazil is moving to implement a 15% income tax on cryptocurrency earnings from foreign exchanges, a key component of a broader tax reform aimed at regulating digital assets in the country. The Brazilian Senate recently approved the reform, which has already passed through the Chamber of Deputies and the lower house of the National Congress. The legislation now awaits the final signature from President Luiz Inácio Lula da Silva, with the new rules expected to take effect from January 1, 2024.
Under the proposed law, Brazilian residents who earn more than 6,000 Brazilian reals ($1,200) annually from foreign-based crypto exchanges will be subject to the 15% tax rate. However, those earning below this threshold will be exempt. This tax mirrors the one already applied to crypto traders using domestic exchanges, bringing consistency to how cryptocurrency income is taxed across platforms.
The tax reform also includes provisions for “exclusive funds”—investment vehicles with a single shareholder—as well as foreign companies operating within Brazil’s financial markets. While the full 15% tax rate will apply to earnings accessed after December 31, 2023, a reduced rate of 8% will be levied on crypto assets accessed before that date.
The Brazilian government expects to raise approximately $4 billion (20.3 billion Brazilian reals) in 2024 from the new tax measures, which have sparked debate among lawmakers. Senator Rogério Marinho criticized the bill, arguing that the government is resorting to creating new taxes due to poor financial management. “The government is creating a tax because it is a poor manager,” he stated.
The growing popularity of cryptocurrencies in Brazil has prompted this move to regulate foreign-held digital assets. According to a September report, around 16 million Brazilians, or 6.98% of the population, currently own cryptocurrency. Tether (USDT) has become particularly popular, surpassing Bitcoin in terms of transaction volume, with over $55 billion transacted since 2019.
The Brazilian Central Bank, headed by Roberto Campos Neto, has also been vocal about tightening crypto regulations to prevent tax evasion. Digital asset imports in Brazil rose by 44.2% between January and August 2023 compared to the previous year, reaching a total of $7.4 billion, further elevating concerns. As part of this regulatory push, the Central Bank now oversees virtual asset service providers (VASPs), while the Comissão de Valores Mobiliários (CVM), Brazil’s equivalent of the U.S. Securities and Exchange Commission, continues to regulate crypto-based securities.
The approval of the tax reform represents a significant step in Brazil’s efforts to standardize the treatment of cryptocurrency earnings and reinforce regulatory oversight in the booming digital asset sector.
