Cryptocurrency taxes for digital nomads in Brazil: how are cryptocurrencies taxed in Brazil?
In addition to what they receive directly from their work, many digital nomads receive income from investments of various kinds, especially cryptocurrencies.
Generally, digital nomads invest in their own cryptocurrency brokers, such as Binance and Crypto.com.
Some digital nomads no longer have Brazil as their habitual residence, but they have a huge fear of submitting the Definitive Exit Declaration because of their investments in Brazil.
Although this fear is less with regard to cryptocurrencies, it still persists.
That's why I've decided to write this series of articles on the taxation of investments.
Before going into the topic of investments, it should be noted that this article is not a recommendation on investments or how to invest in cryptocurrencies.
However, before going into the subject of this article, it's worth briefly explaining what Tax Residency is and what the Definitive Exit Declaration is.
What is Tax Residency?
Tax residence is nothing more than the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the assertion that, because they have no fixed abode, they don't have to declare their taxes anywhere is false.
It doesn't matter if the digital nomad travels every 3 months, every month or every week. Everyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you will have double tax residence, i.e. you will be subject to declaring and paying taxes for two countries at the same time.
What is the Final Exit Declaration?
The Declaration of Final Exit is the document submitted to the Receita Federal (Federal Revenue Service) which will disengage the taxpayer from the Brazilian tax authorities. In other words: you will no longer be a taxpayer in Brazil, so you will no longer have the obligation to file an annual income tax return.
I'll talk more about the Final Exit Declaration in this article.
What is cryptocurrency?
Cryptocurrency is a digital currency, created on a blockchain network using advanced cryptographic systems, protecting the transactions, information and data of those who transact.
In the case of cryptocurrencies, there are specific brokers that provide investment services in cryptocurrencies, generally these brokers only invest in cryptocurrencies.
The most famous brokers are
a) Binance;
b) Crypto.com;
c) Bitget;
d) Bitcoin Market;
f) Foxbit
Most cryptocurrency brokers do not have a branch or head office in Brazil, i.e. they operate entirely abroad, escaping Brazilian taxation like other brokers based in Brazil.
Because of this, the security of the transactions and the high volatility, many people are looking to invest in cryptocurrencies to diversify their investment portfolio.
In the case of those who have submitted their Final Exit Declaration, there will be no need to create a 4373 account to invest in cryptocurrencies, as the cryptocurrency investment brokers are domiciled abroad.
Yes, digital nomads domiciled abroad can invest in assets on the stock exchange in Brazil via two accounts: a DAA account or a 4373 account.
With the DAA account you can invest in savings accounts or CDB'S from the bank you have signed up with.
I've got into more detail about the DAA account and its charges in this article.
The 4373 account is ideal for digital nomads who want to diversify their investment portfolio, such as variable income and investment funds.
I talk more about the 4373 account in this article.
Taxes on cryptocurrency investments
Those with tax residency in Brazil are obliged to declare income from these investments in cryptocurrencies in their Annual Income Tax Return.
In 2023, Law 14.754/23 was passed, regulating the taxation of income from offshore funds, assets and trusts established abroad. This income framework includes cryptocurrencies in article 3, paragraph 1, item II:
"Art. 3 Income earned from financial investments abroad by individuals resident in the country shall be taxed in the manner provided for in art. 2 of this Law.
§ Paragraph 1 For the purposes of this article, the following are considered:
(...)
II - income: remuneration produced by financial investments abroad, including, by way of example, foreign currency exchange variation or cryptocurrency variation in relation to the national currency, income on deposits in digital portfolios or interest-bearing current accounts, interest, premiums, commissions, goodwill, negative goodwill, profit sharing, dividends and gains on secondary market trading, including gains on the sale of shares of non-controlled entities on foreign stock exchanges."
This same law states in Article 2, Paragraph 1 that this income will be declared and taxed separately from other income, and the applicable rate will be a fixed rate of 15%:
"Art. 2 The individual resident in the country shall declare, separately from other income and capital gains, in the Annual Adjustment Statement (DAA), income from capital invested abroad, in the form of financial investments and profits and dividends from controlled entities.
§ Paragraph 1 The income referred to in the heading of this article will be subject to Individual Income Tax (IRPF), in the annual adjustment, at the rate of 15% (fifteen per cent) on the annual portion of the income, in which case no deduction from the calculation base will be applied."
Law 14.754/23 has already come into force as of the 2024 income tax return, so much so that the IRS has detected irregularities from taxpayers who had investments in cryptocurrencies and did not declare this income.[1]
This law is a trend that has been analysed recently - and will continue for a long time - of increased national taxation, especially of assets and income obtained abroad by tax residents in Brazil.
It is clear that it is not so simple to analyse the best strategy based solely on cryptocurrency investments. That's why it's extremely important to carry out a personalised analysis of the investment portfolio so that, in addition to the investment portfolio, it's possible to analyse the individual's economic and social situation in order to find the best solution.
If you are interested in hiring professional legal services related to Tax Planning and Analysis of Investment Portfolio Taxation, we are a law firm specialising in the subject. All you need to do is contact us via WhatsApp or by email: contato@trpuppioadvocacia.com.br
Should I make the tax exit or not?
There is no right answer to this question, as it will depend on the specific case of each individual, not only considering their investment portfolio, but also their social and economic scenario, combined with the objectives they want to achieve.
We are currently living through a period in which taxation in Brazil tends to increase for various reasons, mainly due to the fact that we have a fiscal deficit in excess of R$1 trillion and the lack of political will to carry out an effective administrative reform (cutting spending).
I've commented more on the subject of increased taxation in this article.
However, whatever one's choice and/or intention, it is important that digital nomads consider looking for a qualified tax professional to avoid double taxation and tax evasion.
In order to know which is the best path and the best strategy with regard to investments, as well as assets as a whole, it is essential to analyse the investment portfolio and carry out tax planning with a tax lawyer. In addition to avoiding double taxation and tax evasion, tax planning also prevents taxpayers (digital nomads) from paying undue taxes (more than they should).
If you are interested in hiring professional legal services related to Tax Planning and Analysis of Investment Portfolio Taxation, we are a firm specialising in the subject. All you need to do is contact us via WhatsApp or by email: contato@trpuppioadvocacia.com.br
Comments