Brazil’s 17.5% crypto tax signals a global shift as governments eye digital assets for revenue, ending the era of tax-friendly crypto investing worldwide.
Opinion
Opinion by: Robin Singh, CEO of Koinly
Crypto may be the first tax lever governments pull when scrambling for more revenue, if Brazil’s recent move is anything to go by.
In June, Brazil scrapped its tax exemption for minor crypto gains and introduced a flat 17.5% tax on all capital gains from digital assets, regardless of the amount. The decision was part of a broader effort by the Brazilian government to bolster revenue through .
This is more than a local tax tweak. A clear pattern is emerging where governments are finding ways to extract more tax from the asset class. Around the world, policymakers are taking a fresh look at crypto as a revenue opportunity.
A global pattern is beginning to emerge
It was only in 2023 that Portugal brought in a 28% tax on crypto gains held for less than a year, a significant change for a country that had long treated .
The real question now is how long countries with can hold the line before following suit, and which will be the next to tighten the screws.
Germany, for example, currently exempts crypto gains from capital gains tax if the assets are held for more than one year. Even for holdings under a year, gains of up to 600 euros ($686) annually remain tax-free.
Meanwhile, the United Kingdom offers a broader 3,000 pounds ($3,976) capital gains tax-free allowance on all assets, including crypto, although that amount was slashed by 50% from 6,000 pounds in 2023, signaling possible further cuts in the future.
Retail investor gray zone coming to a close
While it might seem like a small change, further reducing the 3,000-pound threshold could generate significant tax revenue, especially with recent Financial Conduct Authority (FCA) data showing that 12% of UK adults now hold crypto.
It’s hard to imagine that it’s entirely off the table, especially as UK government debt increases.
The era of retail crypto investors enjoying a gray zone of regulatory leniency is closing. As the crypto market matures and prices continue to surge, governments are taking notice of the media headlines covering crypto’s explosive growth.
This is especially true in emerging markets, where governments are under increasing pressure to plug budget gaps without setting off political backlash from more visible or controversial tax hikes.
No other asset matches Bitcoin’s average annualized return of 61.2% over the past five years.
Crypto is an easy target for governments
Luckily, crypto is a reasonably easy tax target for governments. It’s often seen as risky, speculative and perceived as mainly benefiting the wealthy. While taxing it isn’t as controversial with the public, it also brings downsides, especially for everyday investors and startups.
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For example, Brazil’s 17.5% structure hit small traders disproportionately hard.
While big institutions can absorb the costs or relocate to jurisdictions with more favorable rules, everyday users, including those using crypto for saving in inflation-prone economies, bear the cost.
With the increasing odds that other governments will follow Brazil and Portugal’s example, the era of low-tax or tax-free crypto investing may end.
The question isn’t whether other crypto-friendly nations will tighten their grip on crypto taxation; it’s how fast and hard it is.
Opinion by: Robin Singh, CEO of Koinly.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
