The Brazilian Congress is pushing forward legislation allowing for the taxation of crypto assets held abroad by citizens of the South American country.
According to the local press, Brazilian lawmakers on Aug. 11 approved amendments to a bill that defines cryptocurrencies as financial assets for the purpose of taxing foreign investments.
The amendment, sponsored by Congressman Merlong Solano, will enable taxing any gains made from fluctuating crypto prices against the Brazilian real.
According to Solano, the rule promotes equal taxation of crypto assets held in Brazil and abroad. In the previous tax regime, cryptocurrencies held overseas were taxed less than those held in Brazilian exchanges.
The law will also bring crypto assets under the same Brazilian tax rules applying to traditional investments.
Per the approved amendment, any earnings from abroad up to 6,000 reais will be exempt from taxation. Earnings between 6,000 and 50,000 reais will be subject to a 15% tax rate. Anything above 50,000 reais, which is approximately $10,000, will attract taxes set at 22.5%.
Congressman Solano, however, clarified that the new taxes would only apply to assets held in crypto exchanges that do not operate in Brazil. The bill will still require existing crypto operators in the country to register their services as soon as the Central Bank of Brazil creates new operating guidelines for the sector.
Market observers in the region have suggested that the new rule could make trading cryptocurrencies on local exchanges less expensive, especially for investors earning upwards of $10,000 on their assets.
Others also feel the law could boost crypto-related activity in Brazil, with investors possibly repatriating their funds back into the country to avoid the punitive tax charges.
Legislators will now vote on the bill on Aug. 28, and if passed, the new tax regime will come into effect in early 2024. Only digital assets held overseas after Jan. 1, 2024, will be liable for taxation.
The push for the crypto tax bill comes only days after the Central Bank of Brazil revealed its central bank digital currency (CBDC) rebranding. The country is gearing up to embrace virtual currencies fully, calling the CBDC “Drex” instead of the “digital real.”