IR23: What happens if I don’t declare my cryptocurrencies on the IR?

Cryptocurrencies and IR: everything you need to know in order not to make mistakes when depositing

Until May 31st, deadline for Tax return 2023. The highlight of this edition is the incentive to use the pre-filled declaration. According to the IRS, it will save time and help avoid mistakes.

A Tax declaration it is certainly something that still generates a lot of doubts in people’s minds. Especially when it comes to who has to declare, what has to be declared and what amount is charged, questions are always present.

The market for cryptocurrencies, stocks and fixed income assets is still far from the reality of some people who do not know how the taxation process works. Therefore, it is crucial to pay attention to the details and fees before you even start investing to avoid future surprises.

Who has to pay IR on cryptocurrencies?

A very important point about the taxation of cryptocurrencies is that the declaration must be made for investments exceeding R$ 5 thousand. Furthermore, the category in which these assets fall is that of goods and rights. Another detail to consider is that sales exceeding R $ 35,000 per month are subject to withholding tax on capital gains.

How is cryptocurrency taxed?

When you declare your cryptocurrencies on the IR, it is necessary that the declaration is made in reais. Remember that the value considered must be that of when the digital currency was purchased, i.e. it is not the market value that enters the document, but what you paid for the cryptocurrency.

What is the fee charged for cryptocurrencies?

The tax charged for cryptocurrencies is calculated on profits when trades total BRL 35 thousand or more monthly. However, all digital currencies and transactions made in any country should be considered.

On the other hand, if the cryptocurrency transactions do not reach the value of BRL 35,000, the profits are exempt from income tax. However, even in this case, they must be included in the annual return whenever the amount is at least R$ 5 thousand on the last day of the year.

Also, if you trade cryptocurrencies through an overseas exchange or even through a transaction without involving a broker, you must file a statement with the Federal Revenue Agency. In this case, the monthly amount must be more than R$ 30,000 alone or together.

As with other types of variable income investments, the investor also needs to calculate his monthly earnings with cryptocurrencies. To then issue the DARF, calculate and pay the tax due on a monthly basis.

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In which category should cryptocurrencies be declared?

The category for reporting cryptocurrencies is Assets and Rights. They must be declared as if they were an asset, such as a house, a car or a financial question, for example.

For each type of cryptocurrency you own, a new declaration form must be opened. For example, you shouldn’t mix purchases of Ether with Bitcoin or other currencies.

How to declare cryptocurrencies in income tax?

To make the declaration of cryptocurrencies it is necessary to open the “Heritage and Rights” file of the Revenue Agency. Then, look for the “08 – Cryptoactive” group and use the codes according to the digital currency you own:

• 01 – Cryptoactive Bitcoin (BTC);
• 02 – Other cryptocurrencies, known as altcoins, for example Ether (ETH), Ripple (XRP), Bitcoin Cash (BCH) and Litecoin (LTC);
• 03 – Cryptocurrencies known as stablecoins, e.g. 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) etc.;
• 10 – Cryptoassets known as NFTS (NonFungible Tokens);
• 99 – Other cryptocurrencies.

As with other investments that must be disclosed, the amount disclosed is the acquisition plus costs (such as commissions and other fees). The “Discrimination” field is used to indicate which cryptocurrency, amount, name and CNPJ of the company storing your digital coins.

Also, when different cryptoassets are present, they must be reported separately. For example: Ethereum, XRP, Bitcoin, Litecoin, Tether, Chainlink, USD Coin, Polkadot, Polygon, TRON. If the custody is proprietary, the model of the digital wallet in which the cryptocurrencies are held must be disclosed.

Those who have had monthly profits of less than R$ 35,000 must inform the movement in the “Exempt and non-taxable income” form. To do this, use the code 05 – Capital gain on the sale of an asset and report the total profit for the year.

Does anyone who sells digital currencies also have to declare in the IR?

You must indicate the details of the sale in the “Distribution” field. It is necessary to repeat the value declared in the previous year in the “Situation in XXXX” area and reset the field for the current year “Situation in XXXX”.

If part of the coins has been sold, just reduce the amount in proportion to the total amount transferred. If you have 10 bitcoins declared for R＄300k, for example, but you sold half of them in the year, you must indicate the balance of R＄150k in the “Situation in XXXX” box.

Transactions exceeding R＄ 35 thousand per month are subject to tax. So, if you sell more than R＄35 thousand in cryptocurrencies within the same month, any profit from this trade will be subject to capital gains tax. Monthly sales below this amount are tax free.

Taxation is progressive and varies according to the amount of profit:

• 15% on monthly net earnings up to R＄5 million
• 17.5% on earnings above R＄5 million and below R＄10 million
• 20% on earnings above R＄10 million and below R＄30 million
• 22.5% on monthly earnings above R＄ 30 million

I have not declared the cryptocurrencies, what happens?

It is quite common for investors to not make a statement when they are unaware of its real importance. However, if this happens, you may face future problems. Bitso together with Declare Cripto, for example, has provided a free form to help with IR declaration.

This is because, in explaining where the increase in equity came from, if the investment hasn’t been disclosed, there’s no way to prove it. So even if it is not controlled by a public body, the declaration of cryptocurrencies must be done regularly.

Consult the documents necessary to declare the income tax:

Source: Terra

Rose

Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.