Brazil Imposes 17.5% Flat Tax on All Crypto Gains, Ending Exemptions

Brazil has implemented a significant change in its cryptocurrency tax policy, ending the tax exemption for small-scale crypto profits and introducing a 17.5% flat rate on all capital gains from digital assets. This new rule, announced under Provisional Measure 1303, is part of the government's broader strategy to increase revenue through financial market taxation. Previously, Brazilian residents who sold up to 35,000 Brazilian reals in crypto assets per month were exempt from income tax. Gains beyond this threshold were taxed progressively, starting at 15% and reaching as high as 22.5% for volumes above 30 million Brazilian reals. The new flat rate, effective from June 12, removes all exemptions and applies uniformly to all investors, regardless of the size of their transactions. This change means that smaller investors will now face higher tax burdens, while high-net-worth individuals could see their effective tax rate drop. Under the previous system, large trades exceeding 5 million Brazilian reals were taxed between 17.5% and 22.5%. With the uniform 17.5% rate now in effect, many large investors will benefit from a lower tax rate.

The provisional measure also expands the tax base to include crypto assets held in self-custody wallets and foreign crypto holdings. Taxation will be assessed quarterly, with investors allowed to offset losses from the previous five quarters. However, starting from 2026, the window for loss deduction will be tightened. This overhaul extends beyond crypto, as fixed income instruments such as Agribusiness and Real Estate Credit Letters (LCAs and LCIs), as well as Real Estate and Agribusiness Receivables Certificates (CRIs and CRAs), will now incur a 5% tax on profits. Additionally, taxation on betting revenue has increased from 12% to 18%.

The finance ministry introduced these changes following backlash over an earlier attempt to hike the Financial Transaction Tax (IOF). That proposal was shelved after facing stiff opposition from both the market and Congress. The new measures aim to simplify the tax collection process and ensure that all crypto gains are subject to taxation, thereby increasing revenue for the government. This move is part of a broader effort by the Brazilian government to regulate the cryptocurrency market more effectively and bring it under the same regulatory framework as traditional financial markets.

This tax shift affects all resident investors in Brazil, impacting digital asset gains, from major cryptocurrencies like Bitcoin and Ethereum to altcoins and ERC-20 tokens. The Brazilian government's measure intends to capture more tax income from individuals and institutions. Prior exemptions, like those for small trades up to 35,000 Brazilian reals monthly, are now removed, leading to a unified tax rate that closes loopholes for offshore and self-custodied wallets. These changes could reduce retail activity in Brazil's crypto market and possibly affect liquidity from small traders. Market experts suggest that while larger traders might benefit from a single, predictable rate, small-scale participants face a new financial burden. This decision reflects the Brazilian government's strategy to enhance regulatory oversight of crypto assets.

Local and international crypto markets may see adjustments as Brazil's taxation framework evolves with this new regulatory measure. The shift in policy could prompt changes in trader behavior, potentially spurring market adaptation. This latest move aligns with Brazil's broader strategy of regulated economic growth. In March, lawmakers proposed permitting employers to pay workers partially in cryptocurrencies like Bitcoin. Under the proposed rules, crypto payments cannot exceed 50% of an employee’s salary. Full crypto payments would only be allowed for foreign workers or contractors and under specific conditions laid out by Brazil’s central bank. The bill prohibits paying wages entirely in digital assets for standard employees. The legislation would also permit independent contractors to receive full payment in crypto if agreed upon contractually. All crypto payouts must use official exchange rates from Central Bank-authorized institutions.