New laws coming into force this week in Brazil require all citizens to declare their dealings in cryptocurrency to the tax authorities for the first time, as the government looks to recoup tax on crypto transactions.
Local media outlet Agencia Brasil reported that the country’s Internal Revenue Service (IRS) now requires those engaged in cryptocurrency transactions to report their activity, including both private individuals and companies dealing in cryptocurrency.
The rules were first introduced by Normative Instrument 1,888 back in May, but only came into effect on August 1. As well as covering straightforward buy and sell transactions, the reporting requirements also extend to donations, deposits, withdrawals and other interactions with cryptocurrencies.
The reporting requirement is monthly for those affected by the rules, which include all companies and any individuals reporting over 30,000 Brazilian Reals in transactions per month — approximately $7,800.
Market participants are expected to submit reports by the end of the month following the month in which the transactions took place, with the first reports due to be delivered by the end of September.
The new requirements are backed by the threat of sanctions, including fines ranging up to $130 for non-filing. Beyond these fines, the IRS also has the authority to charge up to 3% on the total of unreported transactions as a penalty.
According to the IRS, the digital currency market in Brazil is already bigger than the country’s second largest stock exchange, which itself boasts some 800,000 users.
The measures are intended to help the authorities better regulate cryptocurrency transactions, for the detection and avoidance of money laundering, terrorist financing, tax evasion and other types of fraud.
The requirements come just a matter of weeks after the head of the Federation of Industries of the State of São Paulo said there were growing concerns some citizens were turning to crypto to avoid paying tax.
The reporting requirements in Brazil will be closely monitored by regulators elsewhere, and similar measures could be adapted to fit within other jurisdictions to alleviate the tax implications of illicit cryptocurrency use.
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