5th July 2019
As we reported recently, many countries around the world are cracking down on digital asset tax evasion as part of a wider movement towards tougher tax systems. The latest nation to follow this trend is Brazil, with authorities in the destination seeking ways to prevent evasion on the profits of cryptocurrency transactions. Brazil is one of the fastest growing economies in the world, and as a member of the BRICS group, predicted to be one of the world’s most foremost economies of the 21st century. Therefore, it’s no wonder that it’s a hotspot for international contractors. So, what should professionals know about the changes to Brazil’s cryptocurrency tax laws?
Brazil cryptocurrency tax law
Despite Brazilian president Jair Bolsonaro recently claiming he ‘did not know what a bitcoin was’, the South American nation has been cracking down on digital currency as part of a wider push to tighten tax systems across the country. The Brazil cryptocurrency tax laws stipulate that any cryptocurrency exchanges in the location will now have to be reported to the Department of Federal Revenue of Brazil (RFB). This will allow authorities to freely access data from trading intermediaries and ascertain if there has been any wrongdoing.
Once the rules come into force, the RFB will be able to solicit a wide range of information on anyone suspected of tax evasion. Brokerage firms will be obliged to inform the tax watchdog of all transactions, regardless of value. Other information that the RFB will be allowed to access is the dates and types of transactions, personal info of users, value of the transaction and the service fees charged. Under previous laws, crypto exchanges and other businesses serving as middlemen were not required to provide data on their clients, but now, withholding records will be illegal.
Contracting in Brazil
Despite Brazil’s cryptocurrency tax laws, and general push towards tougher tax systems, the country is clearly an attractive destination for contractors, and home to some very contractor-friendly taxation laws, not least that professionals are considered as non-residents for a total of 183 days, or six months, out of a 12-month period, regardless of whether these days run consecutively. However, there are a number of things that contractors will need to be aware of, along with the often extremely complex Brazilian labour laws. Here’s a few things to take note of:
Visa and Work Permits
The Brazilian Immigration authorities allow foreigners to work in the region on a regular basis only if they hold one of the following main visas:
- Temporary visa (2-year visa) with an employment contract with a local company
- Temporary visa (2-year visa) type without employment contract with the local company, under an umbrella agreement between a Brazilian company and a foreign company
- Permanent visa
It’s important to note that those with a business visa are not allowed to work in the country, but only to have meetings, participate in seminars, meet customers and suppliers, and prospect local markets.
The documents needed when you arrive in Brazil are extensive. In the first instance, you’ll need an identity card, which can be obtained at a Federal Police station. These should be requested within 30 days of arrival in the country or on the receipt of your temporary or permanent residence visa. You’ll also need a Taxpayer card from the Federal Revenue upon completion and presentation of a form. It’s necessary to have an identity card present to obtain this document. Finally, you’ll need a “Working and Social Security Document”, which can be obtained from the closest regional office of the Ministry of Labour.
Income derived from Brazilian sources is subject to a progressive tax rate ranging from 0% to 27.5%. Foreign source income is also subject to monthly mandatory tax payments based on the same rates. Authorities may question the individual up to five years after tax returns are filed if they have seen a discrepancy. For this reason, it is necessary to keep all documents related to your Tax Return in a safe place until this period expires.
Contractors should be aware
Clearly, contractors have a lot on their hands when attempting to work in Brazil. With the destination’s cryptocurrency tax laws, wider push towards tougher legal systems, along with some pretty complex labour laws – compliance will need to be a top priority for those wanting to work in the region. However, this complexity shouldn’t prevent you from trying your hand in Brazil. By partnering with an expert contractor management company, you can rest easy that compliance is being handled by those who understand it best, while you focus on the job at hand.
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