Brazil's Provisional Decree No. 1303 went into effect on June 14th local time, stipulating a 17.5% income tax on all personal cryptocurrency gains, officially canceling the previous monthly tax-exempt amount of approximately 35,000 Reais (about $6,300). The previous system used a progressive tax rate of 15% to 22.5%, which only applied to high-value transactions. Now, the tax rate has been flattened, with retail investors being the first to be impacted, while institutions saw their rate drop from 22.5% to 17.5%.
FinanceFeeds reported that the Brazilian government estimates this measure will increase tax revenue by 10 billion Reais in 2025, doubling to 20 billion in 2026. The law also requires exchanges and wallet providers to withhold taxes on staking and earnings. Economic Minister Fernando Haddad stated at a press conference:
"A unified tax rate will expand the tax base and make the rules simpler."
Tax Reform Details and Potential Impact
Financial technology company ABCrypto calculated that the new system will cause nearly 90% of retail investors with monthly transactions below the tax threshold to pay taxes for the first time; with an annual return of 15%, net earnings could drop by over 10%. In contrast, large-scale traders will see their tax rate reduced from 22.5% to 17.5%, effectively saving 5 percentage points in taxes.
Influenced by the policy news, Brazil's local exchange Mercado Bitcoin saw a 27% increase in trading volume on the 14th, indicating that some investors are closing their positions before the old system expires. Crypto advisor Paulo Silva noted:
"For customers with monthly transactions under 35,000 Reais, the tax burden jumps from zero to 17.5%, causing many to simply stop."
Additionally, the new law requires virtual asset service providers (VAP) to withhold 17.5% in taxes at the source before distributing staking interest and liquidity mining rewards, which may drive some users to unwithheld decentralized platforms or increase compliance risks.
While small investors are complaining, the unified tax rate does officially incorporate cryptocurrency into the investment framework of Latin America's largest economy. If the Congress further confirms the decree, the Brazilian market will formally enter a new normal of "same tax, same rules".
