Brazil Ends Crypto Tax Exemption, Introduces 17.5% Flat Tax on Gains

June 15, 2025 | Amin Haqshanas

Brazil has taken a significant step in regulating the cryptocurrency market by abolishing its tax exemption for small traders and implementing a flat 17.5% tax rate on all capital gains derived from digital assets. This landmark decision was announced as part of Provisional Measure 1303 and is aimed at increasing revenue through the taxation of financial markets.

Change in Tax Regulations

Prior to this reform, Brazilian residents were allowed to sell crypto assets worth up to 35,000 Brazilian Reais (approximately $6,300) each month without incurring any income tax. Profits exceeding this threshold were taxed at a progressive rate that started at 15% and could go as high as 22.5% for transactions surpassing 30 million Brazilian Reais. The recent overhaul eliminates these exemptions altogether, introducing a uniform tax rate that applies to all investors, regardless of the transaction size.

The new tax regime took effect on June 12, 2025, and is designed to simplify the tax landscape for cryptocurrency investments. However, smaller investors may experience a notable increase in their tax obligations under this new framework. In contrast, high-net-worth individuals trading in large volumes may see their effective tax rate decline. Under the previous system, trades exceeding 5 million Brazilian Reais were subject to a tax rate ranging from 17.5% to 22.5%, while the new flat rate ensures that many high-value investors will pay a consistent 17.5%.

Expansion of the Tax Base

In addition to the changes for individual traders, Provisional Measure 1303 includes provisions that broaden the scope of taxable crypto assets. For the first time, cryptocurrencies held in self-custody wallets and assets located offshore will now be subject to taxation. Under the updated regulations, taxation will be assessed on a quarterly basis, allowing investors to offset losses incurred in the previous five quarters. However, starting in 2026, the timeframe for loss deductions will be tightened.

This regulatory shift is not isolated to cryptocurrencies. Other financial instruments traditionally exempt from income tax, such as Agribusiness and Real Estate Credit Letters (LCAs and LCIs), are now subject to a 5% tax on profits. Taxation on betting revenues has also increased from 12% to 18%.

Government’s Revenue Initiatives

These changes come in the wake of governmental efforts to enhance fiscal revenues, particularly after the government faced substantial pushback regarding prior proposals to increase the Financial Transaction Tax (IOF), which were subsequently halted due to opposition from both the market and lawmakers.

In related legislative activities, Brazilian lawmakers are also exploring a proposal that could allow employers to pay their employees partially in cryptocurrencies like Bitcoin. Should this bill pass, employees would not be able to receive more than 50% of their salary in digital assets, with full crypto payments restricted to foreign workers or contractors under specific conditions stipulated by Brazil’s central bank.

Conclusion

Brazil’s move to a flat tax on cryptocurrency gains marks a pivotal moment in its financial landscape, affecting both small and large investors alike. As the cryptocurrency market continues to evolve, these new regulations are expected to shape trading behaviors and the broader financial ecosystem in Brazil. The government’s approach illustrates a balancing act between encouraging investment in digital assets and augmenting its revenue streams in an increasingly complex economic environment.