Learn about the investment possibilities in Brazil and what some technical terms such as ‘hard fork’ and ‘airdrop’ mearn
Since the emergence of Bitcoin in 2009, cryptocurrencies have achieved increasing success on the global financial scene. In Brazil, the cryptocurrency market is booming. According to data released by Chainalysis, a Blockchain analysis company, Brazilians profited R$1.5 billion with bitcoin in 2020. This impressive number places Brazil among the 25 countries with the highest profits from Bitcoin, being the country with the best position in the ranking among all Latin American countries.
Hard fork, airdrop, blockchain. These are a few of the terms that are part of the wide world of cryptoasset operations. And for those interested in venturing into this universe full of technology, understanding the meaning of these words is essential!
With experts specialized in facilitating international transactions, Drummond Advisors, a company with more than 10 years consulting experience in cross-border accounting, taxes and law, we selected some important information on cryptocurrency to help those who are interested in learning more about htis topic. Check it out:
How to invest in cryptocurrency in Brazil?
There are several possibilities for Brazilians who want to invest in cryptoassets. It is possible to invest through investment funds or through ETFs (Exchange Traded Fund), which are funds traded directly on the stock exchange, as is the case with shares. It is also possible to buy virtual currency, but this type of transaction requires a deeper knowledge of the market, as the price of cryptocurrencies is highly volatile. Relying on the advice of professionals who understand the market when investing, is a good tip to manage and mitigate risks with this type of investment.
I bought, sold or invested in cryptocurrencies. Do I have to declare this in my income tax?
Yes. Brazilians who possess more than R$ 5000 in cryptocurrency, must register the possession of virtual currency on their income tax return. This amount should be included in the “Property and rights” section.
In the case of sale of cryptocurrency, there is a tax on sales in excess of R$35,000 made in a single month. In this situation, the investor must pay the tax the following month by issuing a DARF (Federal Revenue Collection Document).
The Brazilian Internal Revenue Service created three types of specific codes for the declaration, check them out!
New codes for the declaration of cryptocurrencies were created this year by the Revenie Service. They are:
- 81 – Bitcoin Cryptoasset (BTC);
- 82 – Other cryptoassets, such as digital coins;
- 89 – Other cryptoactives that are not considered digital currencies, but are classified as security tokens.
How are cryptocurrency sales taxed?
Cryptoassets, such as Bitcoins for example, are taxed on sales that exceed R$35,000 per month. The general criteria for capital gains are applied to the value of the profit. Income Tax taxation varies according to the capital gain.
If the capital gain is below R$ 5 million, the tax is 15%. Between R$ 5 million and R$ 10 million, 17.50%. Between R$ 10 million and R$ 30 million, 20%. The highest tax is 22.50%, for gains over R$30 million.
What is cryptocurrency mining?
It is the vetting of the operations that are registered in the blockchain. This process is done on high-performance computers because it involves complex mathematical instances that must be resolved in order to validate the verified data, maintain and expand the blockchain. Miners who manage to solve this equation first earn cryptocurrencies as a reward.
What does it meant when a cryptocurrency suffers a hard fork or soft fork?
To talk about hard fork or soft fork, we must first understand what is a “fork”. This is an update to the protocol or code of a digital currency. When users disagree about the validity of these changes, a fork in the blockchain protocol occurs where alternative data chains to the original ones are created. In short: it is as if new rules emerged within the algorithm.
A hardfork is when there is a break with the original protocol, which can result, in some cases, in the emergence of a new cryptocurrency. A soft fork is the type of change that still preserves the original code.
What is an airdrop?
An airdrop is the free distribution of cryptocurrencies to the wallets of some users. They are usually made by companies or startups that want to attract the attention of the investor community and increase their user base.
About Drummond Advisors
Drummond Advisros provides international consultancy services for American and Brazilian companies, with a focus on the areas of accounting, tax, law and business development. Founded in the city of Boston, the consultancy grea its presence to the cities of Miami, New York, Orlando, Sao Paolo and Belo Horizonte. The company counts on a team of multidisciplinary professionals with the certification, training and experience in the Brazilian and North American territory.
Written by Aline Ribeiro, Content Consultant at Drummond Advisors, and Marcos Ferreira, Content Assistant at Drummond Advisors