A congressional committee in Brazil approved amendments to a bill that aims to classify cryptocurrencies in foreign exchanges as “financial assets” for taxation purposes, according to local reports. Lawmakers are moving forward with the legislation, aiming to increase taxes on cryptocurrencies held overseas.
Brazil’s National Congress will vote on the bill on the 28th of August. If approved, the legislation would make crypto assets held by Brazilians overseas subject to the same tax rules governing traditional assets and will take effect in January 2024.
Furthermore, the proposed legislation levies taxes on profits resulting from cryptocurrency price fluctuations compared to Brazilian reais and foreign exchange rates. In an interview with Agência Câmara, deputy Merlong Solana highlights that the revision aims to establish equitable taxation, addressing the current situation where overseas crypto investments benefit from reduced tax advantages,
Under the new regulations, foreign income will be taxed at different rates. Amounts up to 6,000 Brazilian reais (about $1,200) will be tax-free. Earnings ranging from 6,000 to 50,000 reais (approximately $10,000) will be subject to a 15% tax rate. Income surpassing this threshold will be taxed at a rate of 22.5%.
New crypto law to attract foreign investment to Brazil
As outlined in the legislation, the revisions will exclusively impact cryptocurrency exchanges that do not maintain physical offices within Brazil.
Numerous worldwide cryptocurrency exchanges are currently active in Brazil, including prominent names like Binance, Coinbase, Bitso, and Crypto.com. In addition to these international players, local entities like Mercado Bitcoin and Foxbit also play significant roles in the market.
Legal experts suggest that these amendments might result in local exchanges becoming a more financially advantageous choice for certain investors, especially those who have accrued profits exceeding the highest tax bracket.
The new law has the potential to amplify domestic cryptocurrency exchange operations and serve as an incentive for foreign enterprises to set up offices within the country. This is due to the incentive users will have to use exchanges that are already operating in Brazil to avoid the high foreign income tax that could be imposed on crypto earnings.
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