The move to regulate and tax cryptocurrencies held on foreign exchanges comes as digital assets are gaining popularity in Brazil.
The Brazilian Senate recently gave the green light to a new tax reform aimed at imposing a 15% tax on cryptocurrencies held on foreign exchanges. The proposed bill on crypto income has already received approval from the nation’s Chamber of Deputies, a federal legislative body, and the lower house of the National Congress of Brazil. It is now awaiting final approval from the country’s President, Luiz Inácio Lula da Silva.
Brazil to Impose 15% Tax on Foreign Crypto Holdings
Once the President gives the final approval, crypto traders in Brazil are expected to comply with the rule and pay up to 15% on all their digital asset earnings on exchanges abroad.
According to Cointelegraph, the law will apply to individuals in the country who earn more than 1,200 (6,000 Brazilian reals) from foreign-based exchanges starting from January 1, 2024. However, those earning less than the stipulated amount are exempt from the rule.
The Brazilian government has stated that the tax rate will be parallel to the one applied to local exchanges. Currently, crypto traders in Brazil who use registered digital asset trading platforms are subjected to a 15% tax. Under the new reform, crypto income earned from foreign exchanges is now subject to the same tax rate, although there is a distinction in tax rates for earnings from funds accessed before and after December 31, 2023.
The law specifies that funds accessed before December 31 will be taxed at 8% only, while those accessed afterward will be subject to the total 15% rate.
Brazilian Senator Calls Out Government for Creating Tax
The new tax reform extends beyond individual investors to “exclusive funds,” referring to investment funds with a sole shareholder and foreign companies operating within Brazil’s financial markets.
The Brazilian government plans to raise $4 billion (20.3 billion Brazilian reals) in revenue next year through these taxes.
In response to the government’s ambitious move to generate billions of dollars through the new tax reform next year, Senator Rogério Marinho voiced his dissent towards the bill, criticizing the government for what he perceives as introducing a tax due to poor management practices.
“The government is creating a tax because it is a poor manager,” he said.
Brazil’s Central Bank to Tighten Crypto Rules
Meanwhile, the move to regulate and tax cryptocurrencies held on foreign exchanges comes as digital assets are gaining popularity in Brazil.
According to a September 19 report by Insider Monkey, 6.98% of the country’s population totaling around 16 million people own crypto.
Earlier this year, in September, the governor of the country’s central bank, the Banco Central do Brazil, Roberto Campos Neto, unveiled plans to impose stringent regulations on the use of digital assets in the region, citing concerns about potential tax evasion.
That same month, the bank published a report noting that digital asset imports surged 44.2% between January and August this year compared to the same period in 2022, totaling around $7.4 billion, increasing fears of potential tax evasion.
The Brazilian central bank was recently given the authority to police virtual asset service providers (VASPs) in the country, while crypto-based securities continue to be regulated by the Comissão de Valores Mobiliários, Brazil’s equivalent of the United States Securities and Exchange Commission (SEC).
