Brazil has removed tax breaks for small crypto investors. The government introduced a flat 17.5% tax on all capital gains from digital assets. This change came through Provisional Measure 1303. It aims to boost public revenue from financial markets.
So far the profits of up to R$35,000 per month from sales of cryptos were free from being taxed. Investors over that limit paid 15%, with higher rates for bigger sums. That rule is no more in practice. Now all the crypto gains have to tackle the uniform rate of 17.5%. This results in small traders’ tax liability emerging for the first time.
We are now in a position where those who managed to stay below the line will feel the pressure. In contrast, larger investors will benefit. The flat rate makes their tax payments simpler. The system previously taxed income over R$10 million at 20% and income over R$30 million at 22%, but it has now removed these entry points.
Crypto traders must report profits qarterly
Under the flat system, wealthy investors are going to be better off; there is no change with crypto in your wallet. The new tax proposal does not need a broker as an intermediary. Nothing prevents the system from recognizing any asset held abroad or off exchanges.
Traders need to keep quarterly calculations of their profits. Investors can use losses from the previous five quarters to reduce gains, but the system will narrow that window by 2026.
Companies applying either the real or the deemed profit rules will not be able to write back their crypto losses. The taxing of cryptocurrencies remains in a parallel regime. Nevertheless, many enterprises might reconsider their cryptocurrency undertakings. And 17.5% is not a cap for cryptocurrencies.
What is more, it affects almost all types of financial instruments. Formerly tax-exempt fixed-income securities will have a new 5% tax imposed on them. These include securities such as real estate and agribusiness funds known as LCIs, LCAs, CRIs, and CRAs. Investors in the said instruments must now adjust their expectations for returns.
Brazil raises tax on betting platforms
Online betting websites also encounter transformative processes. The tax rate on their revenues increases from 12% to 18%. Payouts for winners are still tax-free. The government kept the income and CSLL taxes for operators at the same level.
It introduced these measures in response to criticism from many sectors against raising the IOF tax system. After facing backlash, the government abandoned the plan. Officials are now aiming to generate revenue through more focused measures.
Taxing investments rather than transactions is their way to prevent market disruption in the future. The cryptocurrency sector has now evolved in Brazil. Investors from any class need to rethink. The tax authorities no longer ignore digital coins, wallets, and wagers.
