Brazil Implements Taxes on Overseas Crypto Holdings

The president of Brazil, Luis Inácio Lula da Silva has signed a law imposing taxes on crypto assets held abroad by Brazilian citizens. The enactment of this law took place on Dec. 12 and was promptly published the next day in the Diário Oficial da União, marking a crucial step in the government’s regulatory approach. Commencing from Jan. 1, 2024, the new tax measures are set to have widespread implications.

Contrary to focusing solely on cryptocurrencies, the newly introduced taxes extend to encompass profits and dividends acquired by Brazilian taxpayers through various channels, including investment funds, platforms, real estate, or trusts located outside the country. The ambitious goal of the Brazilian government is to collect approximately 20 billion reals ($4 billion) in new taxes during the fiscal year 2024.

Brazil Offers Favorable Terms for Early Payers

A distinctive aspect of this tax regulation is the incentive for early compliance. Individuals opting to initiate tax payments in 2023 will enjoy a preferential rate of 8% on all income generated up to that point, payable in installments starting in December. Post-2024, the tax rate will be standardized at 15%, with a provision for exempting overseas earnings up to 6,000 Brazilian reais ($1,200).

João Carlos Almada, controller at Brazilian stablecoin issuer Transfero, shared insights with Cointelegraph, expressing the need for refinement in certain aspects of the law. Almada highlighted the importance of addressing elements such as compensation for losses, drawing parallels with established tax rules for stock assets. Anticipating ongoing discussions and regulatory evolution in the country, he emphasized the goal of enhancing transparency and credibility in the market.

Interestingly, Brazil is not alone in scrutinizing the overseas crypto holdings of its citizens. In November, the Spanish Tax Administration Agency issued reminders to its citizens regarding obligations to declare crypto assets stored abroad. However, this requirement specifically applies to individuals with balance sheets exceeding 50,000 euros (approximately $55,000) in digital assets.