Brazil has finished its tax exemption for small -scale cryptography earnings, introducing a flat rate of 17.5% in all capital earnings of digital assets. The new rule was announced under provisional measure 1303 as part of the government’s impulse to increase income through financial market taxes.
Until now, Brazilian residents who sold up to 35,000 Brazilian reaisons (approximately $ 6,300) in cryptographic assets per month were exempt from income tax. The profits beyond that were progressively taxed, starting at 15% and reaching up to 22.5% for volumes greater than 30 million Brazilian reais.
The new flat rate, which entered into force as of June 12, eliminates all exemptions and also applies to all investors, regardless of the size of their transactions, according to a report from the local news portal Do Bitcoin.
While smaller investors will now face a higher tax burden, people with a high level value of the network could end up paying less. According to the previous system, large operations, which exceed 5 million Brazilian reais, were taxed between 17.5% and 22.5%. With a uniform rate of 17.5% in force, many large investors will see their effective fall in the tax rate.
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Brazil points to Autocustody and Cryptography in the high seas
The provisional measure also expands the tax base. Cryptographic assets maintained in autocustody wallets and foreign cryptography holdings are now included in the tax regime.
According to the report, taxes will be evaluated quarterly, investors will be allowed to compensate for the losses of the previous five quarters. However, from 2026 onwards, the window for the deduction of losses will harden.
The review extends beyond cryptography. Fixed income instruments, once exempt from Income Tax, such as credit letters of agribusiness and real estate (LCA and LCIS), as well as the certificates of accounts receivable of real estate and agribusiness (Cris and Craras), now they will incur a tax on 5% on profits.
Meanwhile, betting taxes have increased from 12% to 18%.
The Ministry of Finance introduced these changes after a violent reaction on an earlier attempt to increase the tax on financial transaction (IOF). That proposal was filed after facing a hard opposition from both the market and the Congress.
Related: The Brazilian data regulator defends the prohibition of world cryptographic payments
Brazil considers to allow Bitcoin salary payments
In March, Brazilian legislators presented a proposal that would allow employers to pay workers partially in cryptocurrencies such as Bitcoin (BTC). According to the proposed rules, cryptographic payments cannot exceed 50% of an employee’s salary.
Complete cryptographic payments would only be allowed for foreign workers or contractors and only under specific conditions established by the Central Bank of Brazil. The invoice prohibits paying salaries in digital assets for standard employees.
The legislation would also allow independent contractors to receive full payment in cryptography if they remember contractually. All cryptographic payments must use official exchange rates of the institutions authorized to the Central Bank.
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