Taxation on Bitcoin
Bitcoin is not regulated as a currency in Brazil because the Central Bank considers it too small to apply any specific currency regulation. Still, treated as an asset, the coin needs to be stated as Income Tax.
Bitcoin has become a subject of interest to internet users. The cryptocurrency was created in 2009 and considered the first decentralizing digital coin, different from other digital currencies. It can be used to buy material things as well as to pay for subscriptions and other internet services.
Brazilian Regulation on Digital Currency
In 2013, Brazil created the possibility of normalizing mobile payment systems and the creation of digital currencies, including Bitcoin. The law provides, among other things, the payment schemes and payment institutions which, by law, became part of the Brazilian Payments System.
The law defines Payment Arrangement as a set of rules and procedures that regulates the rendering of a particular service to the public. Being accepted by more than one recipient, through direct access by users, payers and recipients. Digital currencies are defined as the resources stored on a device or electronic system that allow the user to perform a payment transaction.
The law lists the principles that must be considered for the payment arrangements and payment institutions and defines the responsibilities of the Brazilian Central Bank. It also determines that the penalties provided by the legislation are applicable to financial institutions and established by the National Monetary Council and the Brazilian Central Bank - CMN, respectively.
The law also authorizes the Brazilian Central Bank to issue the necessary norms and instructions for the fulfillment of Digital Currency provisions. This must be done in accordance with the guidelines established by the CMN.
Income Tax on Bitcoin
The Brazilian government is still studying how to define Bitcoin in Brazil. The first analysis concluded that bitcoin is not a currency from a regulatory point of view. For tax purposes, Bitcoins are treated as a financial asset. Therefore, they should be filed as an income tax return on how much the Bitcoins are worth and any profit made from theBitcoins.
The Federal Revenue Service, known as Receita Federal, decided that Bitcoins must be declared as “others goods” when the value is higher than BRL 1,000. When more than BRL 35,000 is earned by the profit of selling, the amount must be subject to taxation as Income Tax. There are no official exchange rates for the conversion from Bitcoin to BRL, but the Federal Revenue uses values published on private websites.
In cases where profits have been made from Bitcoins, due to selling or the fluctuation in their quotation, it is necessary to immediately issue of a DARF, Document for Federal Revenue Collection. At the time the profit is acquired, 15% of the profit’s value is collected for tax purposes.
Currency Taxes on Bitcoin
The regulatory assessments of Bitcoin are still being developed and needs more time and acceptance of the cryptancy to be able to make any permanent solutions, but not being considered an actual currency has the advantage of not having any tax of exchange, like IOF, applied.
For the time being Brazilian legislation does not differentiate between domestic and international Bitcoins transactions, the procedure is the same. This effectively avoids the 6,38% tax applied to international currency transactions by IOF.
To avoid losing money because of the coins fluctuation, the conversions must be instantaneous. In this case, Bitcoin is used as a financial transaction protocol more than as a financial asset.
Brazil’s Role in Bitcoin
As the recent integration of the major money transfer system, Neteller, Brazil became the leader of the Latin America Bitcoin market. Being responsible for the highest volume of bitcoin transactions in the region. The average Brazilian Bitcoin payment by volume per day at the moment is around 300 Bitcoins.
Another well known money service platform in Latin America is Advanced Cash. These solutions give Bitcoin users more alternatives to spending their Bitcoin anywhere a credit or debit card is accepted. Using Bitcoin will give a 0% transaction fee.