Cryptocurrency tax in Brazil rises to 17,5% with new MP

• Cryptocurrency tax in Brazil is now 17,5%
• Government ends exemption for sales below R$35
• Brokers must withhold income tax on staking and yield gains

The federal government established a fixed rate of 17,5% of Income Tax on capital gains from cryptocurrencies, through a Provisional Measure published to compensate for losses with the collection of IOF. The main change was the elimination of the exemption for monthly transactions below R$35 thousand, affecting all investor profiles in the sector.

The measure also introduces the obligation to withhold tax directly at source by so-called virtual asset service providers (VAPs), such as brokers that offer products with additional income, such as staking, earning or other forms of yield. According to Daniel de Paiva Gomes, a tax lawyer, these companies must now deduct the 17,5% IR before passing on the income to their clients.

Assets such as ether (ETH), used in protocols that offer interest-like returns, are directly included in this new rule. According to experts, this could encourage investors to migrate to decentralized solutions or to international brokerages that are not subject to withholding taxes.

The repercussion in the market was immediate. Finance expert Bruno Perini commented on social media that “Many people will start using foreign crypto brokers, which do not report data to Brazil, and 'forget' about the assets they have in self-custody”. In his assessment, the new measure could represent the end of the national brokerage market, with a potential reduction in tax revenue, an effect contrary to that desired by the government.

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Disclaimer: The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing or trading cryptocurrencies carries a risk of financial loss.

In the legal sector, the interpretation is that the new tax regime creates an imbalance between national and foreign providers. In addition, there is criticism about the lack of distinction between the types of digital assets — such as bitcoin, NFTs and financial asset tokens —, all subject to the same 17,5% rate, as highlighted by lawyer Marcio Alabarce.

Tax assessment will now be done quarterly for both local and foreign investments. For individuals, it will be possible to offset losses in the same quarter. The only exception granted is the exemption for quarterly sales of up to R$60.

Tokens representing traditional assets, such as fixed-income securities, will follow the tax treatment of the underlying asset. ABToken reported that it is closely monitoring the progress of the MP and its possible impacts on the sector, while ABcripto stated that it sees a setback in the proposed measures.

In Brasília, associations and companies in the sector are discussing alternatives with the Free Market Parliamentary Front, which spoke out against the increase in the tax burden, claiming that the measure compromises innovation and competitiveness in the cryptocurrency sector in Brazil.