How Brazil's New Tax Rate Hurt Small Investors Most

Brazil has introduced a new 17.5% flat tax on all cryptocurrency capital gains, eliminating the previous exemption that allowed small investors to avoid paying taxes on gains up to 35,000 Brazilian reais (approximately $6,300) per month.

This change effective from June 12, 2025, means all crypto investors, including smallholders etc, must now pay tax on any profits regardless of size.

Previously, small investors etc who made monthly crypto gains below 35,000 reais were exempt from tax. Now, even a relatively small or moderate amount of profits are taxed at 17.5%, which significantly increases the tax burden for these users. For example, a 30,000-real profit that was once tax-free now incurs a tax liability of 5,250 reais.

The new flat 17.5% rate applies uniformly to all gains, removing the previous progressive brackets that taxed larger gains at higher rates but exempted smaller ones. This shift disproportionately affects small investors who previously paid little or no tax.

Taxation assessment will be done quarterly instead of monthly, and investors can offset losses only within a rolling five-quarter window, adding complexity for small buyers sellers managing their tax liabilities.

Medium investors now pay a slightly higher flat rate of 17.5% instead of the previous 15% on gains under 5 million reais. While high-net-worth investors may actually benefit, as the previous top tax rate was 22.5% on gains exceeding 30 million reais (~$5.4 million). The new flat rate caps their tax at 17.5%, potentially reducing their tax burden.

The tax applies broadly, including to self-custodied and offshore crypto holdings, closing previous loopholes.

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