The Federal Revenue Service is expected to publish a rule in the coming days to increase control over transactions with cryptocurrencies after the Central Bank publishes the general regulation of the sector. Initially, the goal is to adapt the Brazilian rules to the standards of the Organization for Economic Co-operation and Development (OECD) in order to enable the exchange of information with other countries and strengthen the fight against money laundering and organized crime. In contrast, decisions regarding taxes are carefully considered and should not be announced in the short term.
On Monday, BC released the General Regulation of Virtual Assets, expected since the legal framework for the sector was approved in 2022 and which will come into force on February 2. The standards created mark the entry of crypto companies into the regulated market in British Columbia.
Companies operating or wishing to operate in the market will have to request an operating permit from the Authority. Furthermore, companies registered abroad will have to transfer operations and customers to a service provider in Brazil, whether it is a company in the sector that already operates, a company established to operate in that market or even a securities or foreign exchange broker. There is also a demand to appoint at least three directors in the country.
The BC has also decided that some activities of virtual asset service providers will now be treated as exchanges. This is the case, for example, for stablecoins, cryptocurrencies that track the value of a reference asset, such as the dollar and the euro, and tend to be more stable.
International payments or transfers using Virtual Assets and the transfer of Virtual Assets to fulfill obligations arising from the international use of the Card or other electronic payment means also qualify as foreign exchange transactions.
From a revenue point of view, the already existing requirements for providing information from crypto platforms to the tax authorities about transactions taking place in the country are not met by some companies in this sector, especially those that are not registered in the country. There is particular concern about remittances abroad. It is generally understood that revenue problems in this process may be signs of money laundering.
The new rule should fill these gaps and make the necessary amendments to comply with the agreement with the OECD within the scope of CARF (Cryptoassets Reporting Framework, in free translation), a framework for providing information on cryptoassets, which allows the automatic exchange of standardized data between participating countries. Brazil will begin exchanging information starting next year.
Given the transnational nature of the market, this mechanism is important to combat tax evasion and prevent money laundering. The CARF stipulates, for example, that service providers in the sector must collect and report to local tax authorities details about users who have relevant transactions.
The tax authority’s intention to increase control over GLOBO cryptocurrency transactions was announced by Revenue Secretary Robinson Barreirinhas in an interview last week. At the time, Barreirinhas said this was the body’s next initiative to “close the doors” of the financial system to organized crime, and strengthen the financial stranglehold on factions.
The Minister also said that the market definitions introduced by the HMRC could have tax implications for the tax authorities, but this part is still under study within the authority.
– For example, if it is considered an exchange transaction by the regulatory body, which is the BC, it will have the tax effect of the Financial Operations Tax (IOF) – Barreirinhas said in the interview.
After the BC rules were announced, the market became concerned about IOFs occurring on operations using stablecoins. Since the tax increase in May, Brazilians have been using these assets more to make money transfers abroad or international purchases, as there are currently no taxes by the Israeli occupation forces on this process.
The new regulatory framework, by classifying this transaction as an exchange transaction, may mean a change in this tax understanding. But this depends on a specific procedure by the tax authorities.
However, according to tax experts, the occurrence of future protests is likely, especially since the criterion for the tax increase in May was precisely the unification of collections for similar purposes. This was the case, for example, with the 3.5% rate definition for international transactions using credit and debit cards, transfers abroad, and cash purchases.
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