The Brazilian Federal Revenue (Receita Federal Brasileira – “RFB”) published the Normative Rule no. 1,888/2019 (“IN 1,888”) to oblige individual, legal entities and Cryptocurrency Exchange inform its transactions with the purposes of having a clear tax and financial compliance on cryptocurrency transactions.
What is a cryptocurrency?
According to the RFB, cryptocurrency is “the digital representation of its nominal value in its own currency unity from which the price is giving in local or foreign currency and that the transactions happen electronically by cryptography and technology of record, that can be used as a form of investment, feasible exchanging of values or access to service, that does not constitute current currencies” (free translation of article 5º, item I, of IN 1,888).
What is an Cryptocurrency Exchange?
The Cryptocurrency Exchange is defined as “a legal entity, which is not necessarily characterized as a financial institution, but offers services in relation with cryptocurrency, including intermediation, negotiation, and custody, and accepts any means of payment, including other cryptocurrencies” (free translation of article 5º, item II, of IN 1,888).
Who should inform the RFB?
The following market players are obliged to inform RFB about cryptocurrency transactions:
• The Exchange of Cryptocurrency characterized as tax resident in Brazil;
• Legal entities and individuals that are tax resident in Brazil and perform monthly transactions, individually or accumulated, above BRL 30,000 (thirty thousand reais), and which:
- The transactions were made by an exchange that is foreign tax resident; or
- The transactions were not made by an exchange.
The obligation to provide information applies when operations are related to: purchase and buying; donations; exchange; transfer of cryptocurrency to an exchange; temporary assignment (lease); payment in kind (dação em pagamento); issuance; and any other information that implies in the transfer of cryptocurrency.
What information should be given?
When transactions were made by Cryptocurrency Exchange, and individuals and legal entities, characterized as Brazilian tax resident, that do not perform transactions through an Exchange, the declaration should contain: (i) the date of transactions; (ii) the type of transactions; (iii) the headliners of the transactions; (iv) the cryptocurrency used in the transactions; (v) the amount of cryptocurrency negotiated, up to the tenth decimal place; (vi) the transaction value in reais, excluding service taxes charged for the execution of the transaction, when they exist; (vii) the amount of service taxes charged for the execution of the transaction, in reais, when they exist; (viii) the address of the wallet of shipping and receipt, if it exists.
In case the transactions are made by individuals or legal entities by an Exchange domiciled abroad, the information should also be provided as indicated above, adding the identification of the Exchange.
Until when the information can be provided?
The information should be provided to the RFB until 23h59min59s (Brasília time) of the last business day of the following taxable year the one when the transaction happened.
The Exchange domiciled in Brazil should also provide information, in connection to each user of its services, until the last business day of January of each year (also at 23h59min59s, Brasília time), regarding December 31st of each year: (i) the balance of the fiduciary currency, (ii) the balance of each type of cryptocurrency and (iii) the cost of acquisition of each type of cryptocurrency, declared by the user of its services, taking into consideration that this information should be provided along with the required information regarding the cryptocurrency.
The first report to inform the RFB should be provided until September of 2019, regarding the information of the transaction performed on August of 2019.
If this report is not sent to RFB or it’s provided in delay or with incorrect information it will imply in the application of fine by RFB, by unaccomplished accessory obligation.
Azevedo Sette Advogados Tax team is at your disposal to provide guidance and clarifications on this matter.
* Gabriela Senne Pequeneza