Brazil Crypto Report
Brazil Crypto Report
Episode #94 New Tax on Offshores Cryptos Kicks in: Separating Fact from Fiction
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Episode #94 New Tax on Offshores Cryptos Kicks in: Separating Fact from Fiction

Lawyer and crypto tax expert Thiago Barbosa joins to explain the new guidance issued by the Receita Federal

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Olá pessoal!

Thiago Barbosa is an attorney at Salles Nogueira Advogados and an expert on crypto taxation in Brazil. He joins the show to discuss new rules from the Receita Federal, Brazil’s tax authority, that impact how Brazilian investors must report and pay taxes on crypto assets.

Specifically, we dive into a new law, passed in late 2023, that taxes stockpiles of Brazilian assets held overseas. The Receita Federal was tasked with implementing the rule, and last week released guidance for tax treatment of crypto assets held on foreign exchanges and custodians. So far, this guidance has generated more questions than answers.

Thiago explains that the core issue is distinguishing which crypto assets are considered "foreign financial applications" that would fall under the new 15% flat tax rate with no exemption for small trades. Previously, crypto trades in Brazil were subject to a 15% tax rate, but with a monthly exemption on gains under R$35,000 reais (~$7,000 USD).

According to Barbosa, the key things to understand are:

  • Bitcoin and many other mainstream cryptocurrencies may not actually be considered "foreign financial applications" subject to the new flat 15% rate. The rules are unclear.

  • Staking rewards and "crypto assets that mimic foreign financial applications" will likely fall under the new rules. But line-by-line assessments may be required.

  • Under the new rules, losses can be used to offset gains when calculating taxes owed - a positive change. But it requires meticulous record-keeping across all exchanges and wallets.

  • There is still uncertainty around whether self-custodied wallets (like a Ledger) located abroad would count as "foreign" for tax purposes.

Other key points and themes that emerged:

  • The motivation behind the law was to tax Brazilian wealth held abroad, with crypto dragged along somewhat haphazardly

  • The new rules will benefit "whales" who trade large volumes on offshore exchanges by locking them in at a flat 15% rate irrespective of their total gains or income

  • While threatening use of AI and analytics, it's unclear if the Receita Federal can comprehensively track the activities of Brazilian investors who use offshore exchanges (yet)

Barbosa urged listeners to track their activities meticulously, especially staking and lending rewards which are clearly captured under the new "foreign financial application" language. While simplified in some ways, the new rules have opened a raft of new complexities for Brazilian crypto investors and traders to navigate.

You can connect with Thiago on Linkedin

I hope you enjoy this conversation. Have a great week everyone,

- AWS

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Brazil Crypto Report
Brazil Crypto Report
News, analysis and interviews exploring the Brazilian crypto market