In Brazil in December of 2022, under the direction of Bolsonaro a bill was passed creating a legal framework around the use of cryptocurrencies as official payment throughout the country. While Brazil has not yet followed the lead of El Salvador in naming crypto legal tender, this bill is a pivotal step in the right direction.
Even before the crypto bill was passed, cryptocurrency had become an increasingly important topic in Brazil in recent years. The country has experienced economic instability and an inflation rate that has oscillated between 3.2% and 2,947.7%. In turn, many Brazilians have turned to digital currencies as a way to protect their savings and investments.
A failing economy has also led to a 68.4% increase in Brazilians seeking remote, international employment opportunities. Self-employment in Brazil has hit an all-time high in recent years. In the wake of the Covid19 pandemic, the number of reported freelancers reached over 30 million.
The use of cryptocurrency in Brazil enables citizens to bypass unstable fiat currency, take control over financial transactions, and embrace options for remote, global employment.
The History of Crypto in Brazil
Even before crypto was legalized as a payment method in December of 2022, Brazil represented one of the top five countries with the most crypto investors. In addition to its popular use amongst individuals, crypto was a favored investment by companies as well.
As of August 2022, there were 12,053 unique companies across the country that reported holding assets in crypto.
The high rates of Brazilian crypto investors comes as no surprise since the country has experienced a complicated history of economic corruption. Despite efforts made over the years to restore trust in government and combat historically corrupt politics, there remains a significant problem in Brazil. To this day many government officials and business leaders still engage in dishonest practices.
This has led to a lack of trust in the government, and has hindered the country's economic growth and development.
Crypto has stepped in as a natural solution to the inflated government-issued Brazilian Real. In a last action before leaving office, Bolsonaro’s legalization of crypto as a payment method was an important move in encouraging its wide-spread adoption.
Crypto Compliance in Brazil
As crypto has continued to become widely accepted as a mainstream currency, Brazil has developed laws around its taxation.
Crypto is a high-value asset and as such, it is subject to the same tax laws as those applied to movable goods. This means that crypto is taxed for capital gains at a rate ranging from 15-22.5%.
For profits made on crypto that are less than BRL 5 billion per month but more than BRL 35,000, taxes will be no higher than 15%. For cap gains that are greater than BRL 30 million per month, taxes will reach 22.5%. However, if capital gains are less than 35,000 Reals per month, no taxes are owed.
In the case of inaccurate reporting or failure to declare earnings, penalties range from a fine of BRL 1,500 to a payment to the government of 3% of every misreported transaction.
If crypto is passed down as an estate or an inheritance, taxes are levied following the standard regulations of inheritance tax. This tax rate ranges between 2%-8%, depending on the state in Brazil in which the bequeather held their assets.
Other pro-crypto regulations in Brazil were enacted in 2022, and have reduced the import tax on crypto wallets and mining equipment to zero. From the date of its enactment and until 2025, this resolution passed by the Ministry of Economy makes any equipment that falls under the algorithm SHA256 not subject to import duty.
The bill passed by Bolsanaro to legalize crypto payment brought with it stricter regulation of Brazilian-based crypto exchanges. After the catastrophic collapse of FTX, Brazilian officials wanted to put in place a governing body to oversee legal entities exchanging crypto for local currency, exchanging digital assets and conducting financial transactions in crypto.
The Brazilian government believes that with strengthened regulatory measures, crypto will be more widely accepted as a currency for day-to-day transactions.
Ensuring Legal Compliance While Paying Contractors in Crypto
Global regulations of crypto have seen dramatic shifts over the last few years. As a result, for companies issuing payment in crypto and contractors receiving salaries in crypto, navigating the ever-changing legal landscape can pose a challenge.
Brazil’s government is simultaneously promoting crypto for everyday use while locking down stricter regulatory practices. As a result, it is increasingly important to ensure that your crypto transactions are tax compliant.
For many Brazilian companies and freelancers alike, in an unstable economy payment in crypto has become the preferred option for compensation. The number of Brazilians holding crypto has followed a steady incline as the freelance economy has continued to grow.
Whether your organization is paying contractors in Brazil or internationally, having a plan for tax compliance is critical.
Pay Contractors in Brazil with Rise
With Rise your company can pay contractors and employees in the currency of your choice while ensuring that global compliance laws are met.
Through the Rise Pay platform, you can onboard your company regardless of the treasury you hold; payments to employees can be issued in crypto, fiat money, or even your DAO’s native token. Payees have the freedom to withdraw their earnings with their digital wallets or to transfer wages directly into a bank account.
As Brazil’s tax laws around crypto continue to evolve, so does Rise’s infrastructure for ensuring that they are met. Learn more about compliant crypto payroll with Rise today.
