The Brazilian IRS accounted a flow of about R$ 14 billion in transactions in 2.49 million income statements with bitcoin and other cryptocurrencies, between August and September 2019. The news about the Internal Revenue Service survey raised doubts in the market about such amount. How was this value accounted for?
For some experts, it is impossible to know more details about the crypto transactions. Márcio Ávila, professor of International Tax Law at the Fluminense Federal University (UFF), understands that the Internal Revenue Service has no way to know how this can lead to taxation.
He explains that the agency only brings information about transactions, regardless of whether there was profit or loss. Therefore, it does not make clear the profile of the cryptocurrency market. “I understand this is the total volume traded. However, it is unknown when this will represent Capital Gain, not least because there’s no way of knowing if there was a profit and how much that profit was”.
“I understand this is the total volume traded. However, it is unknown when this will represent Capital Gain, not least because there’s no way of knowing if there was a profit and how much that profit was”.
Revenue Service wants to know if people are declaring cryptocurrency transactions
In an interview with the Bitcoin Portal, the accountant, judicial expert and author on the blog Declarando Bitcoin, Ana Paula Rabello, says that the amount does not reflect the number of cryptocurrencies transacted. According to her, the value represents the movement from transactions with these assets in those months. “It was a mere sum of what was informed. It’s tax volume. There is a new transaction every time the same bitcoin is operated”, she said.
“It was a mere sum of what was informed. It’s tax volume. There is a new transaction every time the same bitcoin is operated”
However, Rabello explains that the regional authority only wants to know if people are declaring transactions with cryptocurrencies. The figures pointed out as what was moved have nothing to do with the volume of traded cryptocurrencies. “The purpose of the Internal Revenue Service is to verify if people are declaring what they are informing, that’s an issue. The disclosure of the number reported in reais as the total transactions is merely the arithmetic sum of the reported operations”.
Sum of operations
“The methodology used by the Internal Revenue Service takes into account the sum of all reported operations”.
The tax lawyer specialized in cryptocurrencies, Rafael Steinfeld, points out that the issue would not be in the figures, but rather what they represent. He also comments that several operations may be duplicated. “The methodology used by the Internal Revenue Service takes into account the sum of all reported operations”.
Thus, Steinfeld explains that if there is a transaction to buy and sell a particular cryptocurrency in the OTC market, there will be two statements about the same transaction. “In an operation of R$ 100,000, the sales end declared its sale and the other end had also declared the same value as a purchase. The number released by the Federal Revenue Service takes into account the two statements, increasing the value of the operation to R$ 200,000”.
On the other hand, EY Tax partner, Antonio Gil Franco, says the IRS with the advent of the normative rulling 1.888/2019, has another tool to track cryptocurrency transactions. He explains that IRS’ demand to issue an additional statement for cryptocurrency transactions when it exceeds R$ 30,000 per month is already a way to have more and better information to audit transactions, and verify that taxpayers are declaring what they own.