New Law Ends Tax Exemptions for Smaller Investors
Brazil has implemented a 17.5% flat tax on all cryptocurrency profits for individual investors, ending long-standing exemptions that previously favored smaller transactions. The change comes through Provisional Measure MP 1303, which aims to boost national tax revenues and standardize crypto tax obligations across all investor classes.
All crypto assets will now be taxed equally, regardless of value, location, or wallet type.
Old Rules Replaced with Flat Tax System
Under the previous system, individuals could sell up to R$35,000 (~$6,300) worth of crypto per month without paying taxes. Gains exceeding that threshold were taxed progressively, with rates reaching up to 22.5% for high-volume traders.
With MP 1303, this progressive tax structure has been eliminated. Instead, a flat 17.5% tax rate will apply to all profits, whether the assets are held on domestic exchanges, foreign platforms, or self-custody wallets.
This new system may reduce tax burdens for high-net-worth crypto holders while increasing the load on smaller retail investors.
Loss Offset Rules and Broader Tax Reforms
Investors are permitted to offset losses, but only within a five-quarter rolling window. Starting in 2026, this rule will become stricter, limiting how losses can be used to reduce future tax bills.
The crypto tax reform is part of a broader financial overhaul. The Brazilian government recently shelved a proposed increase to the IOF financial transaction tax, which faced strong opposition. In its place, tax changes were introduced for:
- Fixed-income investments: Now taxed at a flat 5% on earnings
- Online betting operators: Facing a tax hike from 12% to 18% on revenue
Implications for Investors and the Economy
This tax shift reflects Brazil’s attempt to modernize its approach to digital finance and increase its revenue without escalating traditional transaction taxes. While the measure may hurt retail crypto participants, it could simplify compliance and enforcement for tax authorities.
All crypto transactions will now be visible to tax regulators, signaling a stricter enforcement landscape for 2025 and beyond.