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In recent years, the rise in popularity of cryptocurrencies in Brazil has led the Federal Revenue Service to implement new rules for declaring and inspecting these operations. These changes are aimed at increasing transparency and combating tax evasion, as well as ensuring that taxpayers are in compliance with their tax obligations.

What has changed in the declaration rules

The main changes to the rules governing the declaration of cryptocurrencies by the IRS include the obligation to report transactions, limits on amounts and the deadline for declarations. We'll go into detail on each of these aspects below.

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Mandatory declaration

Since 2022, all taxpayers who carry out transactions with cryptocurrencies must declare their activities, regardless of the amount. This means that anyone who buys, sells, exchanges or uses cryptocurrencies as a form of payment must include this information in their income tax return. The IRS requires taxpayers to report their ownership of cryptocurrencies, the value of the acquisition, the transactions carried out and the date on which they were made.

Value limits

Another important aspect is the definition of limits for mandatory declarations. For cryptocurrency transactions, the IRS establishes that if the total monthly sales exceed R$ 35,000, the taxpayer must declare the transactions. This rule is similar to that applied to other financial operations and seeks to facilitate the control of activities that may generate taxation.

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Deadline for declaration

The new rules also set clearer deadlines for declaring cryptocurrencies. Taxpayers must report transactions carried out in the previous year during the Income Tax Return period, which usually takes place between March and April. Failure to comply with these obligations can result in fines and penalties.

Tax implications

Transactions with cryptocurrencies can generate different types of tax implications, depending on the nature of the transaction. The main forms of taxation include:

Capital gains

When a taxpayer sells cryptocurrencies for more than the purchase price, the profit generated is considered a capital gain and must be taxed. The tax rate varies according to the amount of the gain and follows the IRS progressive table, which ranges from 15% to 22.5%.

Tax on financial transactions (IOF)

If the cryptocurrency transaction involves exchanging a fiat currency (such as the Brazilian real) for a cryptocurrency, the IOF may apply. However, the exemption from IOF for cryptocurrency purchase and sale transactions depends on the amount involved and the length of time the transaction lasts.

How to declare cryptocurrencies

In order to declare cryptocurrencies in the Income Tax Return, taxpayers must follow a few steps:

  1. Report ownershipIn the "Assets and Rights" section, taxpayers must declare the cryptocurrencies they own, specifying the type of asset, the quantity and the acquisition value.
  2. Record transactionsTransactions carried out during the year must be reported in the corresponding section. This includes buying, selling, exchanging or any form of transaction involving cryptocurrencies.
  3. Calculating capital gainsIf there are capital gains, the taxpayer must calculate the profit and report it in the return, as well as considering the application of the corresponding tax rate.

Consequences of non-declaration

Failure to declare or incorrect declaration of cryptocurrency transactions can result in significant penalties. The IRS can impose fines ranging from 1% to 3% of the undeclared value, as well as other sanctions. In more serious cases, administrative proceedings may be opened and legal measures applied.

The importance of compliance

The Internal Revenue Service's new rules on declaring cryptocurrencies reflect a growing effort to regulate this booming market in Brazil. For cryptocurrency investors and users, it is essential to be aware of these changes and ensure that all transactions are declared correctly.

Maintaining compliance not only avoids legal problems and fines, but also contributes to building a more transparent and secure environment for investing in cryptocurrencies. By following the IRS guidelines, taxpayers can enjoy the benefits of cryptocurrencies with the peace of mind that they are fulfilling their tax obligations.

See also: How SEC regulation of the cryptocurrency market could affect Coinbase

September 21, 2024