Brazil Approves New Income Tax Rules, Imposing 15% Tax on Crypto Held on Foreign Exchanges
The Brazilian Senate has recently approved new income tax regulations that are likely to impact Brazilians who hold crypto assets on foreign exchanges. The bill, which has already been approved by the Chamber of Deputies, is expected to be signed into law by President Luiz Inácio Lula da Silva, as the income tax changes were initiated by his administration.
Tax Rate and Implementation
Starting from January 1, 2024, individuals in Brazil earning more than $1,200 (6,000 Brazilian reals) from foreign-based exchanges will be subject to a tax rate of up to 15%. This new tax rate for funds held on international exchanges will be equivalent to that applied to domestically held funds. However, earnings from funds accessed before December 31, 2023, will be taxed at 8%, while those accessed afterward will face the full 15% rate.
Impact of the Legislation
The legislation also impacts “exclusive funds,” referring to investment funds with a sole shareholder, as well as foreign companies operating within Brazil’s financial market. The government has set a revenue target of $4 billion (20.3 billion Brazilian reals) for these taxes in 2024.
Opposition and Regulation of Crypto Assets
Senator Rogério Marinho voiced his dissent towards the bill, criticizing the government for introducing a tax due to poor management. This move to regulate and tax cryptocurrencies coincides with their increasing popularity in Brazil. In September, the governor of the Banco Central do Brazil outlined plans to tighten cryptocurrency regulations, citing concerns about potential tax evasion. The Brazilian central bank was granted authority over virtual asset service providers earlier this year, while crypto-based securities are regulated by the Comissão de Valores Mobiliários, Brazil’s equivalent of the United States Securities and Exchange Commission.
Government’s Justification and Future Plans
The tax regulations are expected to bring in significant revenue for the government, with a revenue target of $4 billion for 2024. This aligns with the government’s efforts to regulate and tax the rapidly growing cryptocurrency market in Brazil.
Overall, the approval of the new income tax rules reflects the government’s proactive approach to tackling the challenges posed by the increasing popularity of cryptocurrencies in the country. This marks a significant step in the government’s efforts to regulate and tax the crypto market, aligning with their broader initiatives to bring about financial stability and curb potential tax evasion in the country.
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