The Brazilian Federal Revenue Secretariat (RFB) has stated that Brazilian investors in the crypto asset market must pay income tax on transactions involving the exchange of cryptocurrencies to others; for example, Bitcoin for Ethereum.
The RFB statement was published in the Official Gazette of the Union and it was the result of a query made by a citizen of the country to the regulator. Late last year, the group issued a ruling stating that cryptocurrency peer-to-peer transactions are taxable even if there is no conversion to the real (Brazil’s national currency).
Although it does not specify what can be understood as “revenue”, since in the exchange of one crypto asset for another there is no capital gain in fiat currency, points out that there is, even so, the obligation to pay taxes on the eventual gain:
“The capital gain calculated on the sale of cryptocurrencies, when one is used directly in the acquisition of another, even if the acquired cryptocurrency is not previously converted into reais or another fiduciary currency, is taxed by personal income tax. natural”.
However, keep in mind that not all investors in cryptocurrencies have to declare their operations, since the regulator established that only investors who manage more than 35,000 BRL (or approximately USD 7,263.67) in cryptocurrencies must pay the tax on the rent.
“Capital gains obtained from the sale of cryptocurrencies are exempt from income tax if the total value of sales in a month, of any type of crypto assets or virtual currency, regardless of its name, is equal to or less than 35,000.00 BRL “, declared the RFB.
Federal Deputy, Kim Kataguiri (We can-São Paulo), He previously declared that he considers the proposal illegal and asked the National Congress to order the immediate suspension of the determination.
According to Kataguiri, the regulations on the calculation and payment of income tax establishes that there will only be capital gains in the exchanges when it comes to national currency (Articles 134 and 136 of Decree 9,580 and 2018) -which does not happen when crypto assets are exchanged for others-.
“In the exchange between crypto assets, there is no exchange involving national currency; one crypto asset is exchanged for another, therefore, there is no increase in equity”, declared the deputy.
The parliamentarian argues that According to article 110 of the Tax Code, the tax law cannot change the definition of private law institutes and, therefore, the Federal Secretariat does not have the power to change an understanding of the Tax Code.
“If the Union wants to tax the exchange of crypto assets, a legal innovation will be necessary, and even in this case doubts may arise about the constitutionality of the new law. What we have is a completely illegal interpretation made by the tax authorities, which clearly exceeds the power of regulation”, Kataguiri said.
Brazilian investors in the crypto market have been required to declare their crypto assets to the regulator since 2016. In 2019, the country’s Federal Revenue Secretariat published Normative Instruction 1888, which determines that all national exchanges are required to report to the regulator on a monthly basis all cryptocurrency transactions made between users.
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