How to declare crypto assets on income tax

There are many doubts about cryptoassets, even among people who have invested in digital currencies for a long time. Previously, to declare crypto assets, the generic space “other assets and rights” was filled. As of 2019, the system was updated with a specific section for the category in income tax declaration.

Therefore, as it is a somewhat recent activity, even more doubts may arise. However, we have good news: the task is not as difficult or as complex as it seems. We did a very practical step by step, in addition to separating some tips and care when preparing the statement. check out how to declare crypto!

What are crypto assets?

Before starting the tutorial, it is interesting to understand better what we are talking about when we approach the crypto assets. They are digital financial assets protected by an encrypted code, which generate a digital representation of the values ​​transacted. The term encompasses all crypto universe: cryptocurrencies, NFT, blockchainif much more.

Thus, they can be used for investments, transfer of values ​​and even to access services. However, the IRS does not consider a crypto asset to be legal tender. That is, they cannot be used to pay fines and taxes or pay off debts.

Who should declare cryptocurrencies

According to the norm of IRS, any crypto asset with a purchase value equal to or greater than BRL 5 on behalf of the taxpayer must be declared. If you purchased Bitcoin for a smaller value, for example, it is not necessary to declare.

This minimum amount is valid for each crypto asset category. If a taxpayer acquires R$ 6 thousand in Bitcoin and R$ 2 thousand in Ethereum, only the first asset needs to be declared. In addition, there are two categories that are required to declare crypto assets:

• A exchange crypto assets domiciled for tax purposes in Brazil;
• A person or entity resident or domiciled in Brazil.

It is considered exchange from crypto-assets to legal entities, even if not financial, that offer services related to operations carried out with crypto-assets, including intermediation, trading or custody, and that can accept any means of payment, including other crypto-assets. The intermediation of operations carried out with crypto-assets is defined by the availability of environments to carry out the operations of buying and selling crypto-assets. In Brazil, Bitcoin Market and Foxbit are some of these platforms.

Declaration of operations with cryptoassets

It is quite easy to include crypto assets on your income tax return. Access the system and fill in the information that must be declared to the IRS. Follow the declaration processing to verify the delivery status.

A Assets and Rights sheet, where taxpayers must report their assets (such as real estate, vehicles and financial investments), has been reorganized into nine major groups, including a new group just for crypto assets.

1. To begin, the taxpayer must select the group 8 - Crypto assets. In it, there will be codes that specify the types of digital currencies:

2. Then you must choose between the following codes:

• 01 Code: crypto asset Bitcoin BTC;
• 02 Code: other cryptocurrencies, known as altcoins. Example: Ether (ETH), Ripple (XRP), Bitcoin Cash (BCH) and Litecoin (LTC);
• 03 Code: crypto assets known as stablecoins. Example: Tether (USDT), USD Coin (USDC), Brazilian Digital Token (BRZ), Binance USD (BUSD), DAI, True USD (TUSD), Gemini USD (GUSD), Paxos USD (PAX), Paxos Gold (PAXG) and others;
• 10 Code: crypto assets known as Non-Fungible Tokens (NFT);
• 99 Code: other crypto assets. Includes token usage, digital assets not considered cryptocurrencies.

3. Locate and select your crypto-asset, and then inform the amount applied in the “Discrimination” field and the data of the broker or digital wallet where it is in custody. Example: Bitcoin (BTC) — Amount, name and CNPJ of the company where it is in custody, or digital wallet model used, when carrying out own custody.

Monthly profits of less than BRL 35 must be reported in the “Exempt and non-taxable income” form. The total annual profit is made with the code “05 — Capital gain on asset disposal”.

Income statement with crypto assets

If you are investing in cryptocurrencies, selling them and making a profit, such income must also be declared. O amount will only be taxed if it exceeds R$ 35 thousand reais. So, if this is your case, the operation must be declared in the Capital Gains sheet.

Now, with a profit of less than R$ 35 thousand, there is no tax incidence and the operation must be filled in the “Exempt and untaxed income”. The cut of the exemption value is made considering the total sale value and not the value of the profits obtained by the investor.

People who sold the assets for a value lower than the purchase price, that is, had a loss, are not taxed, even if the sale value exceeds R$ 35 thousand. The rate is not levied on the total value of crypto assets, only on income. In this way, the income receives the following taxation percentages:

Capital gain tax collection is monthly

A income and profit declaration with cryptocurrencies must be monthly. It calculates the monthly earnings with crypto-assets, issues the Federal Revenue Collection Document (Darf) and pay the tax. Remembering that this is mandatory only for trades that exceed R$ 35 thousand.

With Darf issued, individuals or legal entities must send information about cryptocurrency transactions to IRS until 23:59:59, Brasília time, on the last business day of the month following the month in which the operations took place. The document can be issued and completed in the Siscalweb system, on the page of IRS. If you are required by law to deliver the declaration, but send it after the deadline, you will be charged Fine for Late Delivery of Declaration (MAED).

Cautions when declaring cryptoassets

What precautions should you take when declaring your crypto assets? Renata Mancini, Head of Compliance and Risk at novadax and President of ABCscript, separated some tips to avoid errors and delays.

First, she recalls that the declaration of crypto-assets follows the same pattern as other investments and goods. The Federal Revenue has increasingly facilitated the process of filing the IRPF and, that year, each crypto asset received a code that must be followed by the declarant, facilitating its declaration. NFTs and tokens also need to be declared!

As we explained, the investor does not pay tax on the appreciation of their crypto. For the IRS, what matters is the amount the taxpayer paid for them, not their market value. Renata recommends that the taxpayer ask your broker for documents and income reports so that you have your own control of your operations and cross-reference the data with the reports provided.

A declaration of cryptos must be made in reais, and there is a minimum amount to be declared, which is above R$ 1 thousand. The IRS created several categories and codes in the “Assets and Rights Sheet”, therefore, the specialist emphasizes that it is necessary to pay attention to filling according to the functionality of each crypto asset. In the field of "Discrimination", provide as much detail on the type, quantity and name of the company where the asset is being held in custody.

O cryptocurrency market is becoming more and more popular in Brazil, so be prepared to declare your investments and earnings to avoid paying a fine.

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Sources: Agency Brazil, ABCscript.