Brazil Implements New Crypto Tax Rules That Will Benefit the Rich

In a surprising move, Brazil instituted major changes to its policy on crypto taxes. Under Provisional Measure No. 1303, all crypto investors will be subject to a 17.5% tax on profits.

Brazil is making some surprising changes to its policy on crypto taxes. As reported by CC Today, a new Provisional Measure (MP) No. 1303 will introduce several overhauls to the taxation of digital asset traders in the country.

Previously, small traders in Brazil were exempt from crypto taxes, while larger ones paid up to 22% on annual profits. This levied a significant burden on the capital gains of rich investors.

However, the new measure will see all crypto investors in Brazil taxed at a rate of 17.5%. This will affect small investors, who were previously exempt, and some large investors, who may see their tax burdens decrease.

It is still unclear how this move will benefit Brazil in the long term. If these policies conflict with the government’s attempt to attract crypto investment, it may try other solutions.

Brazil has been making a few major crypto-friendly policy decisions in the last few months. For example, it launched the world’s first XRP ETF in April and is considering substantial Bitcoin investments this month.

This comes on top of other public-private partnerships that are aiming to build out the nation’s Web3 infrastructure.

In this context, Brazil’s attempt to overhaul crypto tax policy has turned a few heads.

According to local reports, Brazil’s new crypto tax rules include several major changes.

Under the previous system, investors were exempt from taxes until their gains reached a threshold of R$35,000 ($6,298 USD). If they hit this income level, they’d pay a 15% tax rate until they reached $900,000 in profits, and so on until they reached a maximum rate of 22%.

However, under the new system, all crypto investors in Brazil will be subject to a 17.5% tax rate. This means small investors pay more, while some large investors may pay less than before.

In other words, this model directly encourages local elites to dominate the nation’s crypto trade and puts regular investors at a disadvantage.

Additionally, this move seems even stranger compared to other proposed taxes from Brazil. Two days ago, a legislator proposed a bill with new restrictions on Bitcoin mining, including stricter licensing and higher taxes on daily operations.

NEW: New bill from a deputy in President Lula's party in 🇧🇷 Brazil proposes restricting Bitcoin mining and trading to licensed entities and imposing a daily tax on these operations. pic.twitter.com요고의 to밝혔다. A bill with "Pour l'examen par le député federal Ricardo Reis (PT-RJ", members of President Luiz Inacio Lula da Silva's party, proposes taxing and restricting Bitcoin (BTC) mining and cryptocurrency trading in Brazil.

The report by monics Barreto on Thursday, suggests that the bill aims to create a new legal framework for crypto-related activities in the South American country.

The bill, which is still in the proposal stage, would require crypto trading platforms and exchanges to obtain licenses from the Brazilian Securities Exchange Commission (CVM).

It would also impose a daily tax on crypto traders and investors, and subject them to the same tax rates as capital gains from stocks, shares in mutual funds, and variable-income funds. Currently, large-scale investors are taxed at a rate of 15% on income above R$35,000 ($6,298) and small investors are taxed at a rate of 22%.

The bill proposes taxing crypto traders at 17.5%, which is the same rate at which income from savings accounts and other types of investment are taxed.

It would also introduce a tax on gambling establishments, which is planned to increase from 5% to 6%.

The bill proposes placing a ban on any new licenses for crypto trading platforms until the CVM completes an assessment of the platforms' administrative, technical, and financial capabilities.

It would also require the government to carry out a study on the economic, social, and environmental impacts of crypto mining in Brazil.

The bill comes amid increasing scrutiny of the crypto industry in Brazil. Earlier this year, the government announced plans to introduce new regulations for cryptocurrencies.

Brazil is a major hub for cryptocurrency activity. According to data from Chainalysis, Brazil ranked 14th in terms of total cryptocurrency volume in 2023. The country is also a fast-growing market for crypto derivatives.

It remains to be seen whether the bill will be approved by Congress. However, the fact that it is being proposed at all is a sign of the increasing importance of cryptocurrencies in Brazil.Provisional Measure No. 1303 was proposed by Brazil’s Finance Minister instead of a Congressman, but both are from the same party. If Brazil was trying to crack down on crypto, why would it lower tax rates for the rich?

If it was trying