Brazilian lawmakers are taking steps to impose higher taxes on cryptocurrencies held abroad. Reports indicate that a congressional committee in Brazil has endorsed changes to a proposed law that classifies cryptocurrencies as “financial assets” for taxation purposes when held as foreign investments, media reports said
The legislation specifically targets cryptocurrency exchanges without a physical presence in Brazil. This change might render local exchanges a more economical alternative for certain investors, especially those whose gains exceed the highest tax bracket.
Legal experts speculate that the law could also invigorate cryptocurrency exchange activities on a national scale and attract foreign entities to establish operations within the country.
Brazil’s National Congress is scheduled to vote on the bill on August 28. If sanctioned, the amended tax regulations will become effective in January 2024.
Moreover, the bill under consideration will subject gains resulting from fluctuations in the value of crypto assets against Brazil’s official currency, as well as foreign exchange rate fluctuations, to taxation.
The rationale behind this revision, according to Deputy Merlong Solano, is to establish equitable tax treatment, as current tax advantages for overseas crypto investments are more favorable.
The upcoming regulations stipulate that earnings up to 6,000 Brazilian reais (equivalent to around $1,200) from foreign sources will not be subject to taxation. Earnings ranging from 6,000 to 50,000 reais (approximately $10,000) will incur a 15% tax rate. Beyond this threshold, a tax rate of 22.5% will be applied.
Recent times have witnessed substantial growth in cryptocurrency-related endeavors in Brazil. The nation’s central bank recently unveiled a new identity for its central bank digital currency, now named Drex. As part of the Drex launch, the central bank is planning to introduce a tokenization system aimed at broadening business access to capital.
