Brazil Enacts 2024 Law Taxing Crypto Holdings Abroad

16 Dec, 2023

Brazil Enacts 2024 Law Taxing Crypto Holdings Abroad

Brazil's President Luis Inácio Lula da Silva has approved a groundbreaking law imposing taxes on cryptocurrency and other offshore investments held by Brazilian citizens. Effective January 1, 2024, this legislation signifies a substantial change in Brazil's approach to the rapidly expanding digital currency market.

Under this law, profits from cryptocurrencies held abroad will face a tax of up to 15%. However, taxpayers who commence payments this year will benefit from a reduced 8% tax rate on income accrued up to 2023. Beginning December 2023, payments will be made in installments. Post-2024, the tax rate climbs to 15%. Moreover, the law exempts overseas earnings below $1,200 from this taxation.

This legislation's impact extends beyond cryptocurrencies, encompassing profits and dividends from various sources like investment funds, platforms, real estate, and trusts. This broad coverage showcases the Brazilian government's intent to broaden its taxation policies.

The law not only affects individual cryptocurrency holders but also investment funds and foreign companies involved in Brazil's financial market. João Carlos Almada, Controller at Transfero, a Brazilian stablecoin issuer, emphasized the necessity for improvements in compensating for losses, mirroring tax rules for stock assets. He remains optimistic about future discussions enhancing market transparency and credibility.

This development aligns with the global trend of heightened regulatory scrutiny over cryptocurrencies. Brazilian central bank governor Roberto Campos Neto announced plans to tighten cryptocurrency regulations in September, echoing a worldwide move towards regulated digital asset markets.

Brazil's decision to tax overseas crypto assets follows a global pattern. Spain's Tax Administration Agency urged citizens to declare crypto stored abroad, targeting those with digital assets exceeding 50,000 euros.

The Brazilian government anticipates collecting up to $4 billion in new taxes by 2024 through this legislation. This projection underscores the law's potential fiscal impact and the government's commitment to leveraging economic opportunities presented by digital assets.