This year, companies such as Tesla and MicroStrategy announced the purchase of bitcoins. In addition to increasing the value of the cryptocurrency, the move raised a question: is it possible to convert corporate cash into crypto-assets in Brazil? According to specialists, the answer is affirmative, but it requires caution from the tax perspective.
The issue is that there is no formal regulation by CVM (Securities and Exchange Commission), Central Bank, or IRS. “We have Normative Instruction 1.888, from the Federal Revenue, which deals with crypto assets and some guidelines in the Individual Taxpayer Q&A Guide, but there is no formal legislation”, explains the specialist in tax law, Daniel de Paiva Gomes, author of the book “Bitcoin: the taxation of cryptocurrencies“. According to him, there are five bills in Congress awaiting to be analyzed.”So there is legal uncertainty regarding the purchase of crypto assets by legal entities”, he says.
For the same reason, the philosopher, service designer, and computer science researcher Courtnay Guimarães Jr., who is currently Chief Scientist of Blockchains and Senior Architect at Avanade, does not recommend that Brazilian companies purchase crypto assets directly. “In the United States, there are clear rules for it, while in Brazil, we don’t have the defined accounting apparatus. Some companies are doing this, but they are startups. For larger companies, the best alternative is to be exposed to the assets indirectly through the traditional market. You can hedge, hedge account”, he says. However, he points out there are risks. “The gains are big, as well as the possibility of loss”.
What are the tax precautions for converting corporate cash into cryptoassets?
Nevertheless, if even knowing the risks, you consider that buying crypto assets is an option for your company, you need to pay attention to some details.
According to Daniel, there is no formal guidance for legal entities. For individuals, the IRS definition is that crypto-assets are not considered securities or legal tender currencies but are equated to financial assets and are subject to tax on capital gains. “So, at the legal entity level, we could consider this same assumption”, he says.
Pay attention to an accounting qualification
Daniel says that there are already studies guiding or suggesting specific actions. For example, if the company’s primary activity is to invest in crypto assets, buying and selling assets, they should be recognized as inventory; afterward, they will be taxed as revenue, operating profit. “However, if this is not the main activity of the legal entity, that is, the company has other activities and wants to invest in digital assets, they can be qualified as intangible assets, or financial assets subject to the calculation of capital gain”, he explains.
So, first, it is essential to be careful with the accounting qualification because it will impact taxation. Depending on the scenario and the tax regime adopted (whether it is actual profit, presumed profit, or simplified taxation system), a specialist must have a critical evaluation to verify the best tax efficiency scenario.
Open the account on behalf of the legal entity
In addition, Daniel points out that transactions carried out through an exchange must be done by an account on behalf of the legal entity. “If it’s in the manager’s name, for example, it will not be possible to post on the balance sheet that the company has crypto assets”, he explains. According to the expert, this can cause the loss of the legal entity’s characteristics and premises, according to Article 50 of the Civil Code, which would contaminate the partners’ assets.
There is no information on how it would be in a decentralized exchange. “In this case, it gets more complicated, but it seems to me that the minimum caution would be to keep the private key in the care of the legal entity, segregated from the individual. This way, there will be no evidence that the crypto assets belong to the individual and not the company”, he warns.
Beware of safety
For Daniel, the third leading care is storing the account information, either from the account access password on the exchange or from the private key.
