On November 29, Brazil's Federal Senate approved new income tax rules. From January 1, 2024, citizens will have to pay 15%–22.5% of their income earned on foreign sources, including transactions that involve cryptocurrencies. Previously, the amount of this tax was 8%. With the new law, the government plans to raise 20.3 billion Brazilian reals ($4.3 billion) for the country's budget in the upcoming year.
Details of the new Brazil tax rules and how they relate to crypto
According to Brazil's Federal Senate new tax rules, any income acquired beyond the country, as well as the one made on crypto, is now taxable at the same rate as local. Here are the main points:
1️⃣ Formerly, distinct tax rates were applied, with 8% levied on income from external platforms and separate rules for domestic platforms. The new legislation applies uniform rates in both cases.
2️⃣ These regulations extend their reach not only to individual incomes but also encompass the earnings of foreign companies operating in Brazil;
3️⃣ The tax rates of 15% and 22.5% apply to citizens based on their annual income, set at 6,000 Brazilian reals ($1,200) and 50,000 Brazilian reals ($10,200), respectively.
Lawmakers expect that these measures will bring 20.3 billion Brazilian reals ($4.3 billion) to the national budget in the next fiscal year.
Why the new Brazil tax rules applying to crypto are needed
Back in September, Roberto Campos Neto, the governor of Brazil's Central Bank, said it was necessary to tighten supervision of cryptocurrencies in the country due to their popularity and use as a means of tax evasion.
The implementation of these measures could rekindle interest in domestic platforms and stimulate greater compliance from foreign companies. This, in turn, would foster a more regulated and safe market environment for authorities and users. Notably, on November 27, the OKX exchange announced its official launch in Brazil.
Is Brazil crypto friendly
Since mid-2022, cryptocurrencies have been recognized as legitimate means of payment in Brazil. The dominance of USDT in the local market, which accounts for 80% of transaction volumes, according to the Brazilian Tax Agency report, highlights their significant demand.
Additionally, Brazil is actively preparing for the launch of the Central Bank Digital Currency (CBDC) known as the Digital Real.
Crypto taxes and regulation throughout the world in the end of 2023
In general, the taxation and regulation of cryptocurrencies is a common thing in many countries. However, they vary in different parts of the world.
Asia is striving to legalise cryptocurrency and apply blockchain technologies in practice. For example, the South Korean authorities plan to make Busan a "blockchain city" and implement the technology into the local bureaucracy. However, there is a downside to this: in August, the Cheongju city authorities requested data from Upbit and Bithumb exchanges about users with tax debts and seized cryptocurrency from debtors.
In contrast, the US has taken a slower approach, carefully approving and scrutinising cryptocurrency companies. In this context, recall the “success” of the Securities Commission (SEC) in the 2023 fiscal year or how things are moving with the approval of spot Bitcoin ETFs.
As the cryptocurrency landscape continues to evolve, regulatory interventions from the authorities worldwide are becoming increasingly active. Read more about this topic in our article: "Cryptocurrency Market Geography 2023".
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