Brazil, the leading economy in Latin America, is undertaking a comprehensive 'overhaul' of the tax system related to digital assets. With the issuance of Provisional Measure 1303 effective from June 12, 2025, the country has eliminated the tax exemption for small investors, instead applying a fixed tax rate of 17.5% on all profits from digital currency transactions.

Major changes in tax rates and scope of application

Previously, individual investors in #Brazil were exempt from taxes if trading below 35,000 reais (approximately 6,300 USD) per month. Only when exceeding this threshold did they incur a progressive tax rate ranging from 15% to 22.5%. Now, all investors, regardless of transaction size, wallet type, or storage location, must face a uniform tax rate of 17.5%. This means that small investors will be most affected, while large investors (especially those trading over 5 million reais) may benefit as their effective tax rate is reduced.

Another notable point is that the scope of taxation has been drastically expanded. Cryptocurrencies stored in self-custody wallets (personal wallets not through exchanges) and assets held at exchanges or accounts abroad are now under the radar of tax authorities. This marks the end of the 'hide and seek' strategy that many investors used to avoid tax obligations.

Additionally, taxes are calculated quarterly, with the ability to offset losses from the previous 5 quarters. However, starting in 2026, this timeframe will be tightened, reducing investors' opportunities for tax optimization.

Larger moves and positive signals from Brazil

MP 1303 does not only affect the crypto sector. The Brazilian government has also eliminated numerous tax incentives for traditional financial products such as real estate bonds (LCI), agricultural bonds (LCA), and income certificates like CRI, CRA – these assets, previously tax-exempt, will now be taxed at 5% on profits. Revenue from the betting market is also seeing a significant tax increase from 12% to 18%. These drastic changes come after the government failed to pass a proposal to increase the tax on financial transactions (IOF), which faced strong opposition from the market and Congress.

However, in the midst of tightening taxes, Brazil still shows goodwill in integrating crypto into the real economy through a proposal to allow salaries to be paid in Bitcoin and other cryptocurrencies. A bill proposed in March allows businesses to pay up to 50% of salaries in crypto for domestic employees and prohibits 100% payments in crypto unless the workers are foreign or freelancers with clear contracts. All crypto payments must be based on the official exchange rate from an organization licensed by the Central Bank of Brazil.

Earlier, Brazil had already issued some guidelines for digital assets. In June 2023, the country implemented a legal framework empowering the central bank to regulate and supervise virtual asset service providers. At the end of last year, the nation's Congress introduced a bill aimed at establishing a national Bitcoin reserve fund, proposing to allocate up to 5% of international reserves to purchase Bitcoin and diversify national assets.