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Brazil’s Federal Reserve has announced that residents of the country trading cryptocurrencies need to pay income tax, even if they do not convert digital assets into fiat currencies.
Thus, the Brazilian tax authorities obliged all citizens of the country to pay income tax on any cryptocurrency exchange. For example, when exchanging bitcoin for ether, even if there was no conversion to the Brazilian real or other fiat currencies. True, there is a certain indulgence – operations over 35,000 reals ($ 7,250) per month should be taxed.
At the same time, the document does not specify how exactly the owner of cryptocurrencies should determine the capital gain, because there was no conversion. However, officials argue that taxes must be paid:
“Capital gains received from the sale of cryptocurrencies, when one of them is directly used to acquire another, is subject to income tax for individuals. Even if the cryptocurrency received has not previously been converted into reals or another fiat currency. Capital gains are exempt from income tax if the total value of sales of all types of crypto assets or virtual currencies, regardless of their name, per month is equal to or less than 35,000 reais.”
Brazilian MP Kim Kataguiri believes that the tax administration’s demand is illegal. He emphasizes that the provision on the payment of income tax on individuals establishes that capital gains occur only when it comes to currency. In the case of trading crypto assets, there is no capital gain – it is simply the exchange of one asset for another. The deputy called on the local National Congress to block the action of the document.
Recall that in late April, the Federal Senate of Brazil passed a bill giving the executive branch the right to develop laws to regulate cryptocurrencies.
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