Are you still confused about how to declare your cryptocurrencies? What has changed before the normative directive RFB 1888/2019 came into force, which already made it mandatory to declare cryptocurrencies for annual income tax purposes and also levied capital gains tax every month?
During the validity of IN1888/2019, the Tax Administration will have information about all operations carried out with the cryptocurrency assets of any person or legal entity in the country.
So, let's start with the minimum amount required to declare cryptocurrencies in your annual adjustment statement. In its 2022 income tax filing tutorial, the Federal Tax Administration instructs that "a group of cryptocurrency assets, cryptocurrencies or other similar digital assets with a value equal to or greater than R$5,000.00" must be reported.
The phrase itself has changed from last year, when the per-asset limit was considered. Therefore, as a precautionary measure, I recommend declaring all of your group of cryptocurrency assets if they cost more than 5,000.00 Brazilian reais.
This year, the deadline for filing annual returns begins March 7, but to receive a pre-completed return, taxpayers must wait until March 15.
The deadline for closing the deadline is April 29, so don't leave it to the last minute.
According to IRS guidance this year, now in 2022, you must report all facts occurring between January 1, 2021 and December 31, 2021 with respect to your position in cryptocurrency assets in your portfolio as of December 31, 2021, which must be notified through the acquisition costs in the "Assets and Rights" tab of its adjustment statement, in the following groups and codes.
Group 08 – Cryptocurrency Assets
01 – Bitcoin Cryptocurrency
02 – Other cryptocurrencies, called torrents
03 – Cryptocurrency assets known as stablecoins
10 – The cryptocurrency asset known as NFT
99 – Other Cryptocurrency Assets
Please note that to purchase cryptocurrencies, you do not have to pay taxes, only those who earn profits (taxable) do so.
If you dispose of your cryptocurrency assets in 2021 by selling them, trading them for other cryptocurrency assets or possibly by making payments from cryptocurrency assets, you will need to determine whether these dispositions are taxable, considering the existence of an exemption limit on dispositions of up to R$35,000.00 per month.
How can you do this? When analyzing the kits sold during each month, if the amount exceeds R$35,000.00 and the profit is calculated, the profit is taxable and must be taxed through DARF code 4600 using the Capital Gains Program of the Federal Tax Administration.
The tax rates levied on profits from taxable transactions follow a progressive rule, as follows.
- 15% of the prize not exceeding BRL 5,000,000.00.
- 17.5% of the portion of the proceeds exceeding BRL 5,000,000.00 and not exceeding BRL 10,000,000.00.
- 20% of the portion of the proceeds exceeding BRL 10,000,000.00 and not exceeding BRL 30,000,000.00; and
- 22.5% on revenues exceeding R$30,000,000.00.
On the other hand, if the kits sold during the month did not exceed R$35,000.00, but there was a profit, that profit is tax exempt. You must add up all tax-exempt profits for the year and enter code 05 on the Tax-Exempt and Non-Taxable Income form.
Do you remember what I mentioned at the beginning of the article about IN 1888/2019, the declaration of the Federal Tax Agency for cryptocurrency assets? This declaration is mandatory for transactions exceeding R$30,000.00 in Brazil and abroad, with the difference that it generates an IN report for you when you make a transaction on a Brazilian exchange.
It is important to emphasize that the information provided under IN is not to be confused with the data provided in April in the individual annual adjustment statement. For the purposes of income information, in addition to purchases and sales, transactions between different cryptocurrency assets, transfers and withdrawals from exchanges, rents and donations are counted.
Any person whose transactions exceed this limit outside of an exchange or on a foreign exchange must notify the Federal Tax Administration electronically via e-CAC by the last business day of the month following the operation.
What if you do not check transactions, do not report any information and do not pay taxes? After the deadline or failure to file an annual adjustment statement (if mandatory), the taxpayer will be subject to a penalty of 1% (one percent) per calendar month or a fraction of the delay, released ex officio and calculated on the total amount of the tax due therein, even if it has been paid in full.
The minimum amount of the penalty shall be R$ 165.74 and the maximum amount shall be equal to 20% of the income tax due. As an initial deadline, it shall be the first (first) day after the end of the period established for the filing of the annual adjustment statement and as a deadline, the month in which the statement is filed or, in the case of non-filing, the date of official publication.
Add the IN1888/2019 penalty to this account, or 1.5% of the transaction if it is an individual.
In addition to the above-mentioned fines, taxpayers are classified as tax evasion and other charges, in addition to tax grid procedures, collection and inspection through cross-referenced information.
To learn more, wait for our eBook – How to declare Bitcoin and other cryptocurrencies for income tax purposes.
To download the IRPF2022 generator program.
Download Capital Gains Program2021 (in IRPF2022, you will use Gcap2021)