Brazilian tax authority obliges citizens to pay income tax on any cryptocurrency trading

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Brazil's Federal Reserve has announced that residents of the country who trade cryptocurrencies must pay income tax, even if they do not convert digital assets into fiat currencies.

Thus, Brazilian tax authorities obligedall citizens of the country pay tax on income from any cryptocurrency exchange. For example, when exchanging Bitcoin for Ether, even if there was no conversion to Brazilian real or other fiat currencies. True, there is a certain concession - transactions over 35,000 reais ($7,250) per month must be taxed.

At the same time, the document does not specify how exactly the owner of cryptocurrencies should determine capital gains, since there was no conversion. However, officials claim that taxes must be paid:

"Capital gains realized on salecryptocurrencies, when one of them is directly used to purchase another, is subject to income tax for individuals. Even if the received cryptocurrency has not previously been converted into reals or other fiat currency. Capital gains are exempt from income tax if the total value of sales of all types of crypto assets or virtual currencies, regardless of their name, for a month is equal to or less than R$35,000.”

Brazilian MP Kim KatagiriKataguiri) believes that the tax department's demand is illegal. He emphasizes that the personal income tax provision states that capital gains only occur when currency is involved. In the case of trading crypto assets, there is no capital gain - it is simply an exchange of one asset for another. The deputy called on the local National Congress to block the document.

Let us recall that at the end of April, the Brazilian Federal Senate passed a bill giving the executive branch the right to develop laws to regulate cryptocurrencies.