Brazil’s new tax law targets offshore cryptocurrency profits, with a 15% levy from 2024

• Brazil is introducing new legislation to tax foreign cryptocurrency assets for its citizens, imposing a 15% tax from 2024 and aiming to generate $4 billion in taxes by then.
• The bill has sparked discussion about greater regulatory clarity in cryptocurrency taxation, and globally, countries such as Spain are tightening regulations on their citizens’ holding cryptocurrencies abroad.

Brazilian President Luis Inácio Lula da Silva has signed a bill that will tax cryptocurrency assets held abroad by Brazilian citizens. The newly enacted law, signed on December 12 and officially published in the Diário Oficial da União the next day, is scheduled to enter into force on January 1, 2024.

What Brazil’s New Cryptocurrency Tax Bill Means

Under the bill, Brazilian taxpayers will be subject to the maximum tax rate. 15% of profits Dividends from various investments held abroad, including cryptocurrency. This tax does not only apply to cryptocurrency profits, but also profits from investment funds, real estate, and foreign trusts.

The government aims to collect about 20 billion reais ($4 billion) in taxes by 2024. Those who start paying in 2023 will be incentivized to pay an 8% levy on all income earned until 2023, with the first installment due in December. From 2024, the tax rate will remain at 15% and foreign profits of up to 6,000 Brazilian reals ($1,200) will be tax-exempt.

Insights from industry experts

Joao Carlos AlmadaThe controller of Brazilian stablecoin issuer Transfero emphasized that taxation of digital assets is not entirely new in Brazil, but that certain elements of the law require clarification.

Almada noted that better definitions are needed for aspects such as compensation for losses during the period and similarities to tax rules for equity assets. He looks forward to continued regulatory developments to improve overall trust by fostering discussions on increased market transparency.

Global Trends: International Survey on Foreign Cryptocurrency Holdings

Brazil’s move follows a global trend as countries increasingly focus on regulating foreign cryptocurrency holdings by their citizens. Last November, the Spanish National Tax Service drew attention to citizens’ obligations regarding reporting cryptocurrency holdings abroad. However, Spain’s requirements primarily target individuals with assets exceeding 50,000 euros (approximately $55,000) in the realm of digital assets.