Brazil Approves New Income Tax Rules for Cryptocurrency
The Brazilian Senate has approved new income tax regulations that will require Brazilians to pay a maximum of 15% tax on earnings obtained from cryptocurrencies held on foreign exchanges. The bill has already received approval from the Chamber of Deputies and is anticipated to be sanctioned President Luiz Inácio Lula da Silva, as the income tax modifications were initiated his administration.
Tax Impact on Foreign-Based Exchanges
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 this tax. The tax rate for funds held on international exchanges will be equivalent to that applied to domestically held funds. However, earnings from funds accessed prior to December 31, 2023, will be taxed at 8%, while those accessed afterward will face the full 15% rate.
Impact on Investment Funds and Revenue Target
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.
Senator’s Dissent and Government’s Response
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 the Comissão de Valores Mobiliários, Brazil’s equivalent of the United States Securities and Exchange Commission.
The Future of Cryptocurrency Regulations in Brazil
The approval of the new income tax regulations is seen as a significant step towards the regulation and taxation of cryptocurrencies in Brazil. The government’s efforts to tighten regulations and impose taxes on cryptocurrencies reflect the growing popularity of digital assets in the country and the need to address potential tax evasion. It remains to be seen how these new regulations will impact the cryptocurrency market in Brazil and whether they will achieve the government’s revenue target.
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