Brazil Sets Flat 17.5% Tax on Crypto Profits, Ending Exemption for Smaller Investors

Brazil has introduced a new provisional measure (MP 1303) imposing a flat 17.5% tax on all cryptocurrency profits for individuals, effectively scrapping a long-standing tax exemption for smaller transactions. This overhaul aims to boost tax revenue and applies to all crypto assets, regardless of their location.

Previously, individuals selling up to R$35,000 (approximately $6,300) worth of crypto per month were exempt from taxation. Gains exceeding that amount were taxed progressively, reaching as high as 22.5% for volumes over $5.4 million. The new rule replaces this progressive system with a flat tax, meaning smaller investors will now face higher tax burdens, while larger holders may potentially see their tax bills shrink, as reported by iGaming Times (originally Portal do Bitcoin).

The new tax measure applies to all cryptocurrency holdings, irrespective of where the assets are held, including overseas exchanges or self-custodial wallets. Losses from crypto investments can still be offset against gains, but only within a rolling five-quarter window. This rule is set to become stricter starting in 2026.

The government has stated that this tax overhaul is aimed at boosting tax revenue. The decision to implement this new crypto tax comes after the government abandoned a proposed hike to the IOF financial transaction tax, which had previously drawn criticism from both industry stakeholders and congressional members.

Notably, alongside cryptocurrency, the new provisional measure also affects fixed-income investments and online betting. Fixed-income investments will now incur a fixed 5% tax on earnings. The online betting sector will also see a tax increase, with taxes on operator revenues rising from 12% to 18%.

The introduction of this flat tax rate on cryptocurrency profits marks a significant shift in Brazil’s digital asset taxation policy, aiming to streamline revenue collection and integrate crypto gains more fully into the national tax framework, impacting investors of all sizes.