The taxation of cryptocurrencies in Brazil has gained prominence as more investors enter the digital currency market. The Brazilian Federal Revenue Service (RFB) has established specific guidelines for the taxation and reporting of these assets. Here are the main points every cryptocurrency investor should know to avoid fines from the tax authorities:
1.Income Tax on Capital Gains Profit obtained from the sale of cryptocurrencies is considered capital gain and is subject to Income Tax. The tax rates vary according to the total monthly gains and are applied as follows:
- Up to R$5,000.00: exempt
- From R$5,000.01 to R$10,000.00: 15%
- From R$10,000.01 to R$30,000.00: 17.5%
- From R$30,000.01 to R$50,000.00: 20%
- Above R$50,000.01: 22.5%
2. Reporting of Transactions Since August 2019, the RFB requires that all cryptocurrency transactions be reported through the Declaration of Cryptoasset Transactions (DOCA). This includes not only sales but also purchases, exchanges, donations, transfers to exchanges, withdrawals from exchanges, and other operations involving cryptocurrencies.
3. Tax Payment The tax must be paid by the last business day of the month following the transaction that generated the capital gain. Payment is made through the Federal Revenue Collection Document (DARF) using the specific code for capital gains.
4. Income Tax Return Declaration In addition to reporting transactions, investors must include their cryptocurrencies in the Annual Income Tax Return. Cryptocurrencies should be declared under the “Assets and Rights” section using the code “99 – Other assets and rights.” The value to be declared is the acquisition cost.
5. Loss Compensation Losses from the sale of cryptocurrencies can be offset against future gains from the sale of other cryptocurrencies, within the same type of operation, to reduce the tax payable. This compensation can be made in the same year or in subsequent years.
6. Retention of Information Keep documentation related to all cryptocurrency transactions for at least five years, as this is the period during which the Federal Revenue may request additional information.
Conclusion
Cryptocurrency taxation in Brazil follows clear and specific rules, requiring careful organization and constant attention to tax obligations from investors. Given the dynamic nature of tax legislation and the continuous innovation in the cryptoasset market, staying updated with current regulations is crucial to avoiding unpleasant surprises from the tax authorities.