Brazil Set to Tax Overseas Crypto Holdings Starting 2024

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Brazil’s President Luis Inácio Lula da Silva has taken a significant step forward with a groundbreaking law that will impose taxes on cryptocurrency and other investments held overseas by Brazilian citizens. Starting on January 1, 2024, this new legislation marks a major shift in the country’s approach to the growing digital currency market.

The law states that profits from cryptocurrencies held abroad will be taxed at a rate of 15%. However, those who start paying taxes this year will be eligible for a reduced rate of 8%, to be paid in installments starting in December 2023. After 2024, the tax rate will go up to 15%. Furthermore, the law includes a threshold, exempting overseas earnings below $1,200 from taxation.

The scope of the law is even broader, covering profits and dividends from investment funds, platforms, real estate, and trusts. This reflects the Brazilian government’s intention to expand its taxation policies.

The effects of this law go beyond individual cryptocurrency holders. It also affects investment funds with a single shareholder and foreign companies active in the Brazilian financial market. João Carlos Almada, Controller at Transfero, a Brazilian stablecoins issuer, commented on the new law. Almada expressed the need for improvements, particularly in compensating for losses, similar to tax rules applicable to stock assets. He expressed optimism for future discussions that will help to increase market transparency and credibility.

This development is part of a larger trend of increasing regulatory oversight of cryptocurrencies. In September, Brazilian central bank governor Roberto Campos Neto announced plans to strengthen cryptocurrency regulations, consistent with the global movement towards more regulated digital asset markets.

Brazil’s decision to tax overseas crypto assets is in line with the direction that many countries are taking. For example, Spain’s Tax Administration Agency recently reminded its citizens to declare crypto stored overseas, targeting individuals with digital assets exceeding 50,000 euros.

The Brazilian government expects to raise up to $4 billion in new taxes in 2024 through this legislation. This demonstrates the law’s potential fiscal impact and the government’s commitment to taking advantage of the economic opportunities presented by digital assets.

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