Brazil has announced a sweeping change to how it taxes cryptocurrency profits, removing exemptions for small investors and replacing the progressive tax structure with a flat 17.5 per cent rate for individuals. The move, part of a broader fiscal strategy, is expected to significantly impact how Brazilians engage with digital assets.
No More Free Ride for Small Traders
Until now, individuals in Brazil could trade up to R$35,000 (around $6,300) worth of cryptocurrency per month without incurring taxes. Profits above that threshold were previously taxed at progressive rates, peaking at 22.5 per cent for gains above $5.4 million. But the new provisional measure (MP 1303) wipes that slate clean, introducing a single, fixed 17.5 per cent tax rate on all crypto profits, regardless of the amount involved.
According to Portal do Bitcoin, the change could mean heavier tax burdens for smaller retail investors, while those handling larger sums might actually benefit from the simplified structure.
Overseas Holdings Also Under the Scanner
In a significant expansion of tax jurisdiction, the new rule applies to crypto assets regardless of where they are stored — be it local exchanges, offshore platforms, or self-custodied wallets. This means Brazilian taxpayers can no longer shield crypto profits by parking them in international accounts.
However, there is a provision for offsetting losses — investors can deduct them, but only within a rolling five-quarter timeframe. Starting in 2026, this window will become even more restricted, tightening compliance requirements.
Crypto Tax Overhaul Part of Broader Fiscal Push
This tax shift isn’t just about crypto. It comes in the wake of the government backing off from a proposed increase to the IOF financial transaction tax, a plan that had sparked resistance from both the industry and lawmakers.
“The government says the overhaul is aimed at boosting tax revenue after walking back a proposed hike to the IOF financial transaction tax, which had drawn industry and congressional criticism.”
In addition to crypto, MP 1303 also introduces changes to other financial sectors. Fixed-income investments will now be subject to a fixed 5 per cent tax on earnings. Meanwhile, online betting operators will see their revenue tax rate climb from 12 per cent to 18 per cent.
The overhaul signals a clear message: Brazil is getting serious about regulating and profiting from the rapidly evolving digital economy. Whether this will stifle retail crypto activity or push it further underground remains to be seen, but the taxman is certainly paying attention now.
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