Brazil’s New Crypto Tax Hits Small Traders, Spares the Rich

In a surprising move, Brazil instituted major changes to its policy on crypto taxes. Under Provisional Measure No. 1303, all crypto investors will be subject to a 17.5% tax on profits.

Under the previous tax regime, small traders were exempt, while larger ones paid up to 22% on annual profits. This controversial tax levied reduces the burden on rich investors.

Brazil’s New Crypto Tax Rules Will Benefit the Rich

Brazil has made a few major crypto-friendly policy decisions in the last few months. For example, it launched the world’s first XRP ETF in April and considered substantial Bitcoin investments this month, and that’s on top of other public-private partnerships.

In this context, Brazil’s attempt to overhaul crypto tax policy has turned a few heads.

According to local media coverage, Brazil’s new crypto tax rules include several major changes.

Under the previous system, investors were exempt from taxes until their gains reached a threshold of R$35,000 ($6,298 USD). If they hit this income level, they’d pay a 15% tax rate until they reached $900,000 in profits, and so on until they reached a maximum rate of 22%.

However, under the new system, all crypto investors in Brazil will be subject to a 17.5% tax rate. This means small investors pay more, while some large investors may pay less than before.

In other words, this model directly encourages local elites to dominate the nation’s crypto trade and puts regular investors at a disadvantage.

Additionally, this move seems even stranger compared to other proposed taxes from Brazil. Two days ago, a legislator proposed a bill with new restrictions on Bitcoin mining, including stricter licensing and higher taxes on daily operations.

Provisional Measure No. 1303 was proposed by Brazil’s Finance Minister instead of a Congressman, but both are from the same party. If Brazil were trying to crack down on crypto, why would it lower tax rates for the rich?

If it was trying to encourage crypto investment, why crack down on miners? Of course, this legislation might not pass, but it could reveal internal policy disputes.

In any event, local media claims that these crypto taxes are an effort to ameliorate other fiscal controversies in Brazil. The government is imposing a flat 17.5% rate on similar types of investment and removing exemptions from assets like fixed-income securities.

The tax on gambling establishments also increased by 6%.

For now, it’s difficult to predict what impact these taxes will have on Brazil. If these policies conflict with the government’s attempt to attract crypto investment, it may try other solutions.