The new taxes will apply to users keeping their crypto in crypto exchanges without a physical presence in Brazil.
In a bid to streamline tax regulations for cryptocurrencies, Brazil's Congress is actively considering modifications to the existing tax code. The focus is on cryptocurrencies held outside of Brazil, with legislators keen to level the playing field regarding tax breaks on such investments.
A congressional committee in Brazil has endorsed adjustments to a bill that categorizes cryptocurrencies as “financial assets” in the context of foreign investments. This move comes with the intention to tax the returns on crypto investments based on the fluctuation in their value against the Brazilian real, as well as shifts in foreign exchange rates.
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Deputy Merlong Solano shed light on the objective behind this revision, claiming that the government wants to equally treat crypto investments abroad and in the country.
Overseas crypto earnings of up to 6,000 Brazilian reals (approximately $1,200) are poised to enjoy tax exemption. However, crypto gains that fall in the bracket between 6,000 and 50,000 reals (around $10,000) will face a 15% tax rate. Beyond this range, a higher 22.5% tax would be applicable.
It is important to note that the changes will target cryptocurrency exchanges without a physical presence in Brazil. Legal analysts predict that this could make domestic crypto exchanges a more affordable option for investors, especially those with significant gains.
Furthermore, the newly proposed tax structure might motivate foreign cryptocurrency exchanges to open offices in Brazil. Several international crypto exchanges, including Binance, Coinbase, Bitso, and Crypto.com, are already operational in Brazil, alongside homegrown platforms like Mercado Bitcoin and Foxbit.
The bill is set to be deliberated upon by Brazil’s National Congress on August 28th. If greenlit, these revised tax rules would be implemented from January 2024.
Before these developments, Brazil has also been a hotspot for crypto activities. Recently, the country's central bank unveiled the rebranding of its central bank digital currency to "Drex." The launch of Drex also features the central bank's plans to roll out a tokenization system, intending to bolster business access to capital in the region.
