Small Investors Hit as Brazil Imposes 17.5% Flat Tax on Crypto Profits

Brazil has eliminated the tax exemption for small-scale crypto profits, instituting a flat 17.5% tax on all capital gains from digital assets.

Announced under Provisional Measure 1303, this move is part of the government’s broader strategy to boost revenue through financial market taxation.

Previously, Brazilian residents were exempt from income tax on crypto sales up to 35,000 Brazilian reals (about $6,300) per month, with progressive tax rates starting at 15% and climbing to 22.5% on transactions exceeding 30 million reals.

The new flat tax applies uniformly to all investors, regardless of transaction size, as reported by Portal do Bitcoin.

While this change increases the tax burden for smaller investors, it may reduce it for high-net-worth individuals, who previously faced rates between 17.5% and 22.5% on trades above 5 million reals.

Under the new system, many large-scale traders could benefit from a lower effective tax rate.

Self-Custody and Offshore Crypto on Brazil’s Hit List

Brazil’s new provisional measure significantly broadens the scope of its crypto tax regime.

For the first time, digital assets held in self-custody wallets and foreign-based crypto holdings will be subject to taxation—marking a clear signal that the government is tightening oversight across decentralised and offshore channels.

According to official sources, taxes will now be calculated quarterly, with investors permitted to offset losses incurred over the previous five quarters.

However, starting in 2026, that deduction window will be shortened, potentially raising the long-term tax burden for frequent traders.

This sweeping reform is not limited to crypto.

It also affects traditional financial instruments that were previously tax-exempt.

Profits from fixed-income securities such as Agribusiness and Real Estate Credit Letters (LCAs and LCIs), as well as Real Estate and Agribusiness Receivables Certificates (CRIs and CRAs), will now face a 5% income tax.

The betting sector was not spared either—the tax rate on betting revenues has jumped from 12% to 18%.

These adjustments follow the government’s failed attempt to increase the Financial Transaction Tax (IOF), a proposal that was ultimately scrapped after facing fierce resistance from financial markets and lawmakers.

In its place, the finance ministry appears to be taking a more targeted, yet comprehensive, approach to raising revenue—aiming not just at crypto, but at a broader set of previously untapped financial flows.

Brazil Contemplates Permitting Bitcoin Salary Payments

In March, Brazilian legislators introduced a proposal that could mark a significant shift in how wages are paid—by allowing partial compensation in cryptocurrencies such as Bitcoin.

The draft bill sets clear boundaries: no more than 50% of a salaried employee’s income may be paid in digital assets.

Full payment in crypto would be restricted to specific cases, such as foreign workers or independent contractors, and only under conditions approved by Brazil’s central bank.

Importantly, the legislation prohibits paying standard employees entirely in crypto, underscoring a cautious approach to protecting workers from volatility while embracing innovation.

Freelancers and independent contractors, however, would be permitted to receive their full compensation in digital currency if both parties agree to it contractually.

To ensure transparency and regulatory compliance, all crypto disbursements must be calculated using exchange rates provided by Central Bank-authorised entities.

If passed, the measure could position Brazil at the forefront of integrating digital assets into everyday financial systems—while raising important questions about stability, risk, and regulatory oversight.