The new income tax reform should take a lift with Brazil’s minimum wage changes to make it easier to pass, and should even target the cryptocurrency market.
This is because cryptocurrencies are considered investments in the proposal and their income must be taxed in the country.
As financial investments, new tax rules will soon be introduced for the market, Folha de São Paulo discovered.
It’s worth remembering that Brazil’s Federal Revenue is already charging investors to send information about their negotiations. Since 2019, when Norm Instruction 1.888/2019 came into effect, those who invest in bitcoin and cryptocurrencies in the country must send information to the tax authorities.
In 2023, the new regulation for the sector, with law 14.478/2022, came into force, but the new rules did not change the competence of the RFB in this matter.
What will change with the taxation of cryptocurrencies in the income tax reform?
In practice, profits made from operations with cryptocurrencies are already subject to taxation, as investors must pay the DARF corresponding to the profit, once they manage to make a profit.
The exchange between cryptocurrencies is also taxed, i.e. when an investor exchanges one cryptocurrency for another and makes a profit, he has to pay tax.
In April 2023, the RFB released a note on cryptocurrency taxation for investors, clarifying the proper rules once and for all.
In practice, the new tax on cryptocurrencies should not change much of what already exists, although the rules are not yet completely clear and will be released in detail in the coming days.
Approved rules have yet to be validated by the National Congress
It is worth remembering that the proposal is still running as an interim measure, MP No. 1.172/2023. To become law, it needs the approval of the National Congress and must be approved by the Chamber of Deputies and the Federal Senate.
“Art. 9 Income earned from January 1, 2024 on financial investments abroad by natural persons residing in the country will be taxed as provided for in art. 8e. § 1. For the purposes of this article shall be taken into account: I – financial investments abroad – for example, interest-bearing bank deposits, interest-bearing certificates of deposit, crypto assetsdigital portfolios or current accounts with income, shares of mutual funds, excluding those treated as entities controlled abroad, financial instruments, insurance policies whose principal and income are repayable by the insured or by its beneficiaries, certificates of investment or capitalization, retirement or pension funds, fixed and variable income securities, derivatives and equity interests, except those treated as controlled entities abroad;”.
So if the legislature approves the changes, they will take effect on January 1, 2024 and should affect the Brazilian cryptocurrency market.
Revenue does not consider cryptocurrencies to be an official form of money
Another important detail for future regulation regarding cryptocurrencies in Brazil assumes that cryptocurrencies are not official forms of money, at least not according to the various agents of the Brazilian government.
For example, in 2017, the Central Bank of Brazil released a public note calling cryptocurrencies “cryptoactives,” a way of endorsing not being a form of money or currency, but financial assets.
The Federal Tax Agency, following the same understanding as Bacen, also revealed that cryptocurrencies are nothing more than financial assets.
“Crypto-assets are not considered legal tender, under the terms of the current regulatory framework, but may be assimilated to assets subject to capital gains and must be declared at acquisition value in the Assets and Rights Sheet (Group 08 – Cryptoassets), taking into account the specific codes below (01, 02, 03, 10 and 99), when the purchase value of each type of crypto-asset is equal to or greater than BRL 5,000.00said the RFB in March 2023.
In the coming days, Brazilian investors expect more news about possible additional taxes or not, which could harm the development of the cryptocurrency market in the country.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
