Brazil Introduces Crypto Disclosure Provision for Taxpayers

The fiscal business year in Brazil is going to end on 31st May 2021 and the taxpayers will have to submit their tax returns before the expiry. Brazilian Taxation Authority has recently mandated upon the national taxpayers to make full disclosure of their crypto assets in their returns if they held digital assets worth more than US$ 1,000 in 2020.

Usually, the tax year in Brazil ends on 30th April every year. However, because the country is undergoing massive impacts of the Covid-19 pandemic, the Government had extended the expiry of the tax year by a further 30 days. The new deadline for submission of annual tax returns was therefore 31st May 2021. As per the law, if any taxpayer is failed to submit the annual returns before the deadline, then fines are imposed upon non-complying taxpayers.

Receita Federal is the authority which is the taxation authority of Brazil.

A new provision was introduced recently in the taxation laws through which taxpayers were directed to make a disclosure of their crypto assets. It was specifically asked that if any taxpayer had owned 5,000 reals worth of digital assets in the past year, will report to the Authority. This means that if anyone had held US$ 1,000 worth of digital assets in 2021, will be required to report it in his or her annual report for the year 2020-21.

The good thing about the law is that the disclosure is sought from those crypto holders who own assets under US$ 1,000. In addition, they will not be entitled to pay any sort of tax on their crypto holding. However, the capital gain tax will be collected on crypto from those taxpayers whose crypto holding exceeds US$ 6,700.

The authority warned that those who will submit the required information before the deadline will not be penalized. However, after the expiry, the authority would be legally entitled to initiate proper legal action. For this purpose, the authority also warned that hefty amounts will be obtained from non-compliant taxpayers in the shape of fines. The authority told further that even there are any irregularities in the annual tax return filing, even then taxpayers will be allowed to make corrections. However, such an option will be available to those taxpayers, who had submitted their returns in time.

Those who are found violating the law and deliberately concealed their crypto holding will be facing fines. It was informed that the fines could range from 20% to 150% over and above the amount of tax to be collected.

A Brazilian tax expert, Paula Rabello, has advised that taxpayers would not need to panic at all. She said that they should not provide any information until they are certain that the information is correct. She advised that what needed the most now is that taxpayers should immediately spend some time gathering the information required.

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