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Brazil Approves Tax on Overseas Cryptocurrency Gains

The Federal Senate of Brazil has given the green light to new income tax rules that could mandate Brazilians to pay up to a 15% tax on income derived from cryptocurrencies held on exchanges outside the country. The bill, approved on November 29, has already passed through the Chamber of Deputies and is anticipated to receive approval from President Luiz Inácio Lula da Silva, whose administration initiated the income tax rule changes.

Effective January 1, 2024, the proposed tax will be applicable to any Brazilian earning more than 6,000 Brazilian reals ($1,200) on exchanges based outside Brazil. This aligns the tax rate with that applied to funds held domestically. Funds earned before the stipulated date will be taxed when accessed by the owner, with earnings on such funds accessed before December 31 taxed at 8%.

The legislation also impacts “exclusive funds,” referring to investment funds with a single shareholder, and foreign companies active in the Brazilian financial market. The government aims to generate 20.3 billion Brazilian reals ($4 billion) from this tax in 2024.

Senator Rogério Marinho expressed opposition to the bill, highlighting potential challenges and concerns. In September, the governor of the Banco Central do Brazil, Roberto Campos Neto, had announced plans to tighten cryptocurrency regulations in response to the surging popularity of crypto in the country. He expressed suspicion that crypto was being exploited for tax evasion, prompting increased oversight.

The Brazilian central bank gained jurisdiction over virtual asset service providers in June, part of a broader effort to enhance regulatory control. Crypto-based securities fall under the purview of the Comissão de Valores Mobiliários, Brazil’s equivalent of the United States Securities and Exchange Commission. These recent developments signal Brazil’s commitment to addressing the evolving landscape of cryptocurrencies within its regulatory framework.

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