We are approaching the fateful moment: the famous annual income tax return. The declaration has always been relevant in the tax world, but it has acquired greater importance for those who operate with cryptoassets, mainly because of the various means of acquisition and disposal of cryptocurrencies.
And it is not only in April of each year that taxpayers must be concerned about the tax issues on their cryptoassets. Structurally, three major topics should be on the radar of bitcoiners and crypto holders:
- The filing of the annual income tax return, with the indication of the specific codes for each category of cryptoasset, provided its acquisition cost exceeds R$ 5. 000.00.
- Compliance with the accessory declaration obligations described in Normative Instruction 1.888/2019 of the Brazilian IRS.
- Payment of income tax levied on transactions with cryptoassets, either income modality (IRS-bill) or capital gain (revenues of any nature).
The inclusion of cryptoassets in the annual tax return according to the codes of the functions they perform – namely: payment tokens, utility tokens, NFTs, security tokens, etc. – is just the tip of the iceberg.
The content and wording of the transmitted rights that underlie the cryptoasset in question should guide the taxpayers’ decision-making.
Furthermore, if the transactions are carried out through national exchanges, the latter are responsible for complying with the instrumental duties described in the Normative Instruction 1.888/2019 of Brazilian Internal Revenue Service
On the other hand, if cryptoasset transactions are carried out through international exchanges or intermediaries, or even if the user operates via P2P (peer to peer), it is the taxpayer’s responsibility to complete and comply with the accessory obligations described in Instruction 1.888/2019, if the set of transactions exceeds R$ 30.000,00/month.
Finally, it is time to talk about the effective taxation of the operation. Although we usually talk about capital gains on cryptoassets, this is not always the case. Suppose the receipt of cryptoassets by the user is a product of the work developed by him or the capital invested. In that case, we will be facing an asset increase of economic and legal availability of income in the income mode, subject, therefore, to the general rules of taxation by the IRS-bill based on progressive rates (up to 27.5%).
This is the case, for example, of the artist who mints his NFT, sells said nonfungible cryptoasset, and receives 2 ETH as payment. The ETH received will not be taxed as capital gain but as ordinary income.
However, the general rule, at least for most cryptoasset investors, is the disposal of cryptoassets as capital gain, with progressive tax rates from 15% to 22.5%, with an exemption that applies for the disposal of small value assets (set of transactions whose total value does not exceed R$35.000,00 in a month). It seems simple, but it is not. This is because several points require further analysis, such as: (i) is staking taxed? If yes, as income or capital gain? (ii) are cryptoassets obtained through crypto games taxed? (iii) is the exemption for the cryptoasset set or individualized by protocol? Finally, (iv) is the exchange of cryptoassets taxed?
These are very interesting topics that will be discussed in the webinar held by Transfero on March 9th, starting at 7:30pm.