The Brazilian Federal Revenue wants investors to pay to pay Crypto tax on trading earnings even if there is no exchange for the country’s national currency.
CASSIO GUSSON – COINTELEGRAPH

Brazil’s Federal Reserve (RFB) has announced that Brazilian investors in the crypto-asset market must pay income tax on transactions. This Crypto Tax involves the like-kind exchange of cryptocurrencies, such as Bitcoin (BTC) for Ethereum (ETH).

The announcement was the conclusion of a consultation with the regulator by a citizen of the country. The organization produced an opinion at the end of last year claiming that trading between cryptocurrency pairs is taxable even if no conversion to real (Brazil’s national currency) occurs.

Although there is no capital gain in fiat money when exchanging one crypto asset for another. It does state that there is still a duty to pay taxes on the future profit:

“The capital gain calculated on the sale of cryptocurrencies, when one is directly utilized in the acquisition of another, is taxed by the individual’s income tax, even if the acquisition cryptocurrency has not previously been changed into reais or another fiat currency.”

However, it should be emphasized that trades do not require all crypto investors to declare their trades. Consequently, the regulator specified that only investors who trade more than BRL 35,000 (about $7263.67) must pay income tax.

“I consider the Federal Revenue proposal is illegitimate and has requested that the National Congress suspended immediately the determination.”
Federal deputy Kim Kataguiri (Podemos, or the National Labor Party)

According to Kataguiri, the law on the calculation and payment of IRPF (Individual Income Tax) specifies that there will only be capital gain in exchanges that involve the currency (articles 134 and 136 of decrees 9580 and 2018), which is not the case when dealing like-kind crypto assets.

“There is no trade involving currency in the exchange of crypto assets; one crypto-asset exchange for another, thus there is no equity rise,” Kataguiri stated.

According to article 110 of the Tax Code, tax law cannot change the definition of private law institutes. Therefore, the Federal Revenue does not have the authority to change an understanding of the Tax Code.

“If the Union wishes to tax the trading of crypto-assets, it will require legal innovation. Even in this situation, it may raise questions about the new law’s constitutionality. What we have is a fundamentally illegal interpretation by the tax authorities, which obviously exceeds their regulatory authority ” explained Kataguiri

Since 2016, the authorities force Brazilian cryptocurrency investors to report their crypto assets. The country’s Federal Revenue Service issued Normative Instruction 1888 in 2019, which mandates that all national exchanges record all cryptocurrency transactions between customers to the authority on a monthly basis.

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