Brazil Abolishes Crypto Tax Exemption for Retail Investors Brazil has abolished its exemption from income tax for small retail crypto investors, applying a 17.5% flat tax on all capital gains. The change, implemented under Provisional Measure 1303, represents a significant policy turnaround as the government seeks to raise revenue with broader financial market taxation. Previously, traders could sell up to 35,000 Brazilian reals (about $6,300) in crypto monthly without paying taxes. Profit above that was progressively taxed from 15% to 22.5%. From June 12, the 17.5% flat rate applies across the board—regardless of trade volume or investor profile—abolishing the progressive tax scheme. High-Net-Worth Traders May Pay Less Interestingly, the new system may operate in favor of Brazil’s biggest crypto traders. In the past, transactions over 5 million reals were taxed as much as 22.5%. Now, such transactions are taxed at the lower 17.5% flat rate, which may reduce the amount of tax in total for large investors. On the other hand, smaller investors—who had hitherto paid no tax at all—will find their crypto-related tax bill skyrocket. Self-Custody and Foreign Crypto Now Taxed The new tax law broadens the tax base to self-custodied and offshore-held crypto assets. In other words, even crypto assets stored in private wallets or overseas are subject to taxation now. Tax will be levied on a quarterly basis, and investors can claim a setoff for losses incurred in the previous five quarters. However, from 2026, the deduction period will be shortened, decreasing the ability to offset gains against older losses. Other Financial Instruments and Betting Also Impacted The crypto tax changes are included in a broader fiscal reform. Profits made on fixed-income investments like LCIs, LCAs, CRIs, and CRAs—previously tax-free—will be taxed at 5% going forward. In addition, the tax on betting revenues has been increased from 12% to 18%, mirroring the government’s broader effort to capture revenue from emerging industries. Brazil Investigates Crypto Salaries In addition to tax reform, Brazilian lawmakers are mulling legal frameworks for wage payments in cryptocurrency. A bill in March would allow for payment of as much as 50% of an employee’s salary in crypto, depending on exchange rates approved by Brazil’s central bank. Foreign workers and independent contractors could be paid entirely in crypto, provided some contractual and regulatory conditions were met.
