Governments are viewing cryptocurrency as a quick tax leverage to increase revenue, clearly demonstrated by Brazil imposing a 17.5% tax on all capital gains from digital assets.
The tax tightening trend is spreading: Portugal imposes 28% on gains held for less than 1 year, the UK significantly reduces capital gains exemption, while Germany still offers incentives if held for more than 1 year. The 'gray' era for retail investors is about to close.
MAIN CONTENT
Brazil has removed the exemption for small gains, imposing a fixed tax of 17.5% on all cryptocurrency capital gains.
Global trends: Portugal 28% for short-term gains, the UK reduces exemption to £3,000, Germany still exempts tax if held for more than 1 year.
Retail investors and startups are most affected, while large organizations may shift to more favorable jurisdictions.
Why has cryptocurrency tax become a quick fiscal lever?
Cryptocurrency is easy to become a tax target as it is seen as risky, speculative, and mainly benefits the wealthy, making it difficult to generate strong public reaction like other tax measures.
As the demand for increased budget revenue rises, taxing digital assets provides immediate revenue, is easier to communicate, and is easier to implement thanks to the international reporting framework. The OECD issued the Cryptocurrency Asset Reporting Framework (CARF) in 2023, supported by the G20, to standardize cross-border tax information exchange (Source: OECD, 2023).
At the same time, the EU passed DAC8 in 2023, requiring cryptocurrency platforms to report transactions to the tax authorities of member countries, expected to take effect from 2026 (Source: European Union Council, 2023). These initiatives make tax evasion increasingly difficult.
What happened in Brazil in June?
Brazil has removed the tax exemption for small cryptocurrency gains and imposed a fixed tax of 17.5% on all capital gains, regardless of size.
This move is part of efforts to expand revenue sources from the financial market, making cryptocurrency a clear contribution channel. Although this is a change in one country, it signals a common direction: leveraging digital assets to offset the budget.
The immediate impact is that retail investors are the most affected group, while large organizations have the capacity to absorb costs or relocate to more favorable jurisdictions.
How is the global trend forming?
Governments are shifting from incentives to tightening cryptocurrency taxes, with clear moves in Portugal, the UK, and strategic stagnation in Germany.
Portugal, once very friendly to cryptocurrency, has imposed a 28% tax on gains held for less than 1 year since 2023. The UK has reduced the general capital gains exemption to £3,000 from the 2024/25 fiscal year, indicating further tightening potential. Germany still exempts tax if held for more than 1 year, maintaining its long-term attractiveness.
The question is no longer 'will there be tightening' but 'how fast and strong will it be,' especially as the international reporting and enforcement framework is being finalized.
How has Portugal changed in 2023?
Portugal imposes a 28% tax on cryptocurrency capital gains held for less than 1 year, marking a major shift from the previous broadly tax-free policy.
This change appears in the 2023 State Budget Law, bringing Portugal closer to European standards (Source: Portugal State Budget Law 2023). Long-term investors may still benefit, but short-term transactions face significant tax costs.
How is Germany currently taxing cryptocurrency?
Germany exempts capital gains tax on cryptocurrency if held for more than 1 year, and for holdings of less than 1 year, gains up to 600 euros per year are still exempt.
This regulation keeps Germany as a friendly destination for long-term holding strategies. However, as the general trend is to increase revenue, the potential for future adjustments still needs to be monitored, especially if international reporting standards make tax flows from digital transactions significant.
What direction is the UK heading?
The UK has reduced the annual capital gains exemption to £3,000 for all assets, including cryptocurrency, from the previous £6,000.
Although the £3,000 figure seems small, with 12% of adults holding cryptocurrency according to FCA data, lowering the threshold could create significant revenue. In the context of rising public debt, exemptions may continue to shrink (Source: FCA; HM Treasury/HMRC, 2023–2024).
Is the 'gray' era for retail investors coming to an end?
The window of privilege for retail investors is closing as prices and levels of interest rise sharply, drawing attention from tax authorities.
The average annual return of Bitcoin reached 61.2% in the last 5 years according to the original content, making cryptocurrency a media and policy focal point. In emerging markets, budget pressures further push governments to choose the less reactive option: taxing digital assets instead of increasing consumption or labor taxes.
The consequence is that the tightening pathway will gradually become clear, from reducing exemptions to expanding reporting and increasing enforcement.
Who is most affected by this tax tightening?
Retail investors and startups are significantly impacted, while large organizations may reallocate activities to more favorable areas.
In Brazil, the uniform 17.5% rate burden small transactions more heavily. Users in inflationary economies, using cryptocurrency to save, will bear unavoidable tax costs. Cryptocurrency startups may see their profit margins shrink due to compliance and tax costs.
In contrast, organizations with sufficient resources can structure their taxes or relocate, mostly minimizing the impact.
How fast and strong will the tax tightening be?
The key question is not whether there will be tightening, but the speed and extent, as the international reporting framework is ready.
The OECD's CARF and the EU's DAC8 promote the transparency of transaction flows, making it easier for tax authorities to detect and collect taxes (Source: OECD, 2023; European Union Council, 2023). The UK has demonstrated the trend by significantly lowering the exemption threshold in just 2 consecutive years. Countries that were once friendly to cryptocurrency may enter a reassessment phase.
Germany remains a positive exception for long-term holding, but the pressure to integrate common standards may make future policies more flexible.
What does Robin Singh, CEO of Koinly, emphasize?
The prevailing view is that cryptocurrency is an 'easy-to-tax' leverage, and many countries will follow Brazil and Portugal.
The core message is that the tightening tax trend is structural, no longer localized. As exemptions shrink and reporting pathways expand, the era of low or tax-free cryptocurrency is coming to an end. Retail investors should adapt early to the new reality in transaction planning and holding.
How should investors prepare for the wave of tax tightening?
Complete transaction records, understanding exemption thresholds, and holding periods are the top three priorities.
Please standardize transaction data by each tax residency country, understand holding period rules (e.g., Germany over 1 year), and monitor changes in capital gains exemption thresholds (e.g., UK £3,000). Optimizing annual gains and losses for tax purposes can help reduce the legal burden. When needed, consult local tax advisors to ensure compliance.
Due to cross-border nature, if trading across multiple exchanges/countries, it is necessary to cross-check reports according to OECD/EU standards when effective to avoid discrepancies.
Quick comparison table of cryptocurrency tax frameworks in several countries
The table below summarizes the key points discussed, helping to compare the impact on investors.
Current Regulations Country Current Regulation Key Threshold/Tax Rate Notes Brazil Removes small gains tax exemption, taxes all cryptocurrency capital gains Fixed tax of 17.5% Change from June (according to original content) Portugal Taxes short-term gains, offers incentives for long-term holding 28% for holdings under 1 year Effective from 2023 (State Budget Law) Germany Exempt from tax if held for more than 1 year Exempt up to 600 euros/year for holdings under 1 year Attracts long-term strategy UK Significantly reduced general capital gains exemption £3,000/year (≈ $3,976) Reduced from £6,000 in 2023
Frequently Asked Questions
Why did Brazil impose a 17.5% tax on all cryptocurrency capital gains?
To increase budget revenue and expand the tax base for digital assets. Cryptocurrency is an 'easy target' and causes less public reaction compared to other taxes.
In Germany, is there a tax on cryptocurrency held for more than 1 year?
According to current regulations, capital gains from cryptocurrency will be tax-exempt if held for more than 1 year. Under 1 year, exempt up to 600 euros/year.
How does the £3,000 exemption in the UK apply to cryptocurrency?
This is a general capital gains exemption for all assets, including cryptocurrency. This level has been reduced from £6,000, indicating a tightening trend.
Is Portugal still a 'tax haven' for cryptocurrency?
Not like before. From 2023, Portugal imposes a 28% tax on gains held for less than 1 year; long-term holdings have better incentives.
What will the global tax trend for cryptocurrency look like in the coming years?
It is highly likely that tightening will occur quickly and synchronously thanks to the OECD's CARF and the EU's DAC8, along with the demand for increased budget revenue.
Source: https://tintucbitcoin.com/brazil-siet-thue-tien-so-hoi-ket/
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