Brazil’s Citizens Will Pay Tax on Cryptocurrency Related Revenue.

Citizens of Brazil are now required to pay tax on any cryptocurrency-related activities and revenue, as announced by the Federal Revenue of Brazil (RFB). This new law means that every cryptocurrency-related activity like NFT flipping, remittance, and trading activities are taxable, with some exceptions.

However, the enforcement is a bit confusing and surprising to see as, currently,  no cryptocurrency exchange supports the Brazilian Real, which is the national currency of Brazil.

In a memo published in the Diario Oficial da Uniao, which is the official journal of the Federal Revenue of Brazil, the outcome is the result of a consultation between a Brazilian citizen and one of the country’s financial market regulators. 

Towards the end of 2021, Brazil decided that there is an argument that trading between cryptocurrency pairs is taxable even if there is no conversion to the Real (Brazil’s national currency).

However, there is confusion on what can be regarded as profit in the crypto space, as the crypto market is volatile. Most times, the trader might be taking out their initial capital or loss to avoid liquidation and may at times lose their investments before eventually recuperating them. Purchasing currencies like Bitcoin, as well, is confusing as their price is so volatile. 

“The capital gain calculated on the sale of cryptocurrencies, when one is directly used in the acquisition of another, even if the acquisition cryptocurrency is not previously converted into reais or another fiat currency, is taxed by the individual’s income tax.”

It should be noted that the law does not apply to all crypto investors; the RFB has established that only cryptocurrency investors that have above BRL 35,000 ($7263.67) in cryptocurrencies are bound by these rules. So beginner investors should be happy that this taxation does not apply to them. 

“Capital gains earned on the sale of cryptocurrencies are exempt from income tax if the total value of the sales in a month, of all kinds of crypto assets or virtual currencies, regardless of their name, is equal to or less than BRL 35,000, 00 (thirty-five thousand reais),” declared the RFB.

Hopefully, this leads to more adoption of cryptocurrency in the Latin American region, as clearer rules and regulations allow for its mass acceptance.

Featured Image: DepositPhotos © Alexmit

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