- Brazil ends small-scale crypto tax breaks, sets 17.5% flat rate.
- Self-custody and foreign-held crypto assets now face taxation in Brazil.
- Fixed income gains taxed 5%, ending long-standing investor exemptions.
Brazil has officially ended the tax exemption for small-scale cryptocurrency profits and introduced a flat 17.5% tax rate on all capital gains from digital assets. This decision was stated in Provisional Measure 1303, by the government in order to hike revenue by the use of taxation and the financial markets.
Brazil Expands Tax to Self-Custody and Foreign Crypto Assets
Before, those who trade up to Rs35,000 per month in cryptocurrencies were not paying any tax as Brazilians. Any amount of profits that exceeded this limit but did not surpass R 5 million were to be taxed at 15 percent. The new rule will mean that all crypto traders will now be equally taxed, irrespective of the amount that he or she trades. This implies that the already exempted people are going to pay tax, become tax payers, for the first time. Moreover, the investors that worked within the previous threshold will also have to pay more taxes.
The new measure might, on the contrary, favor the bigger investors. The older system had investors who exchanged R$5.00 million and more pay a sliding tax rate. Previously, Brazil used a tiered tax system for high-volume crypto traders. For example, those trading between R\$5 million and 10 million paid 17.5%, while trades over R$30 million were taxed at 22%. However, the new rule introduces a flat 17.5% tax rate for all investors. As a result, smaller investors will now face higher taxes. Meanwhile, some large investors may actually pay less than before under this uniform tax policy.
The government has also widened taxes. Self custody crypto assets will now be taxed, and crypto assets that were not traded through brokers will be subject to the tax. This comprises investments in the digital wallets and overseas virtual assets. Tax officials clearly instructed taxpayers to report gains, no matter the investment location.
Fixed Income Securities Face 5% Tax After Long Exemption
The new rule stipulates that tax computation should be done on a quarterly basis. Investors can offset gains with loss that has been posted in the last five quarters. This flexibility however, will be limited onwards to 2026. Companies under the real or presumed profit system will follow existing tax rules. However, they cannot deduct digital asset losses from profits.
Besides cryptocurrency, the flat 17.5% tax rate will also apply to a wide range of financial investments. Fixed income securities, such as Agribusiness Credit Letters (LCAs), Real Estate Credit Letters (LCIs), Real Estate Receivables Certificates (CRIs), and Agribusiness Receivables Certificates (CRAs), which were previously exempt from income tax, will now face a 5% tax on profits. This change impacts a wide set of investors who have used these instruments to earn a tax-indifferent income in the past.
Market analysts claim that this new measure can be considered to impact the behaviour of traders; both locally, and internationally. Crypto investors might find reasons to narrow down their plans as regulations in Brazil get stringent.
In earlier this year, Brazil has also proposed to pay partial wages in the form of cryptocurrency. In the draft law, crypto wages are capped at 50 percent of the earnings of a given employee. Only foreign employees or independent contractors can receive full crypto payments under specific conditions. However, these payments require approval from the central bank. The payments have to be on the official exchange rates supplied by the authorized financial institutions.
The new tax policy indicates that Brazil is ready to control digital finance, increase government income and be transparent in crypto-related practices.
