Brazil Implements New Cryptocurrency Tax Regulations

In a significant policy shift, Brazil has officially ended its tax exemption for small-scale cryptocurrency traders, introducing a flat capital gains tax rate of 17.5% on all digital asset profits. This new policy, outlined in Provisional Measure 1303, aims to boost government revenue through enhanced taxation of financial markets and went into effect on June 12, 2025. ## Changes to Tax Exemptions

Previously, Brazilian taxpayers who realized gains from selling cryptocurrency valued up to 35,000 Brazilian reals (approximately $6,300) per month enjoyed an exemption from income tax. Gains exceeding this threshold were subject to a progressive tax system, where rates started at 15% and could rise as high as 22.5% for profits exceeding 30 million Brazilian reals.

Under the newly enacted flat tax regime, all investors, regardless of the size of their transactions, are now subject to the same 17.5% tax rate. This alteration means that while smaller traders may see an increase in their tax liabilities, larger investors, particularly those making trades exceeding 5 million reals, could experience a decrease in their effective tax rates compared to the previous progressive structure.

Expanded Tax Base and Regulations

In addition to the introduction of the flat tax rate, Provisional Measure 1303 broadens the scope of taxable assets to include cryptocurrencies held in self-custody wallets and those held offshore. Tax will be assessed on a quarterly basis, allowing investors to offset losses from the previous five quarters. However, it’s important to note that beginning in 2026, the period for claiming these offsets will be reduced.

The measures implemented through this provisional regulation do not solely focus on cryptocurrencies. They also extend to fixed-income instruments that were previously exempt from income tax. Investments in Agribusiness and Real Estate Credit Letters (LCAs and LCIs), as well as certificates for receivables in the real estate and agribusiness sectors (CRIs and CRAs), will now face a tax of 5% on profits. Moreover, the tax on betting revenues has seen a hike from 12% to 18%.

Background and Context

The Brazilian finance ministry’s decision to overhaul the tax structure followed considerable backlash against an earlier initiative to increase the Financial Transaction Tax (IOF), which was eventually scrapped due to strong opposition from both the market and members of Congress.

In March, discussions were also underway regarding a proposal that would allow employers to partially compensate workers with cryptocurrencies like Bitcoin. If passed, this legislation would permit workers to receive up to 50% of their salary in digital currency, with full payments acceptable only for independent contractors and foreign workers under specific conditions.

Brazil’s move to tighten its regulatory grip on cryptocurrency and increase taxation reflects a broader global trend toward more stringent oversight of digital assets, as governments strive to harness this burgeoning economic sector to bolster fiscal revenues.

As these changes take effect, market participants in Brazil will need to adapt to the new tax landscape and consider its implications for their investment strategies in the cryptocurrency space.