Brazil IRS Creates Penalty Code For Dishonest Crypto Taxpayers
The IRS in Brazil has turned the spotlight on crypto deals and transfers, creating a special penalty code to fine for misreporting.
Brazil Requires Monthly Filings for Crypto Activity
Failing to file a monthly report of crypto asset movements triggers “Revenue code 5720 – Default for Default / Incorrect / Delay in Reporting on Transactions Performed with Crypto”, reported community portal OBN.
Brazil introduced crypto regulation this August, and the IRS claims it has received reports for $14 billion in transactions in the past few months. It is uncertain how that figure was reached, and whether it is based on transfers alone, or involves trading.
The IRS requirement, however, may only involve transactions related to trading. Moving actual coins is anonymous in most cases. When a coin is traded for fiat, however, a taxable event must be accounted. For instance, accounting for November trades must happen by the end of December.
Based on LocalBitcoins volumes, interest in Brazil is relatively stable. Local exchanges remain highly active, though the Brazilian real makes up about 0.03% of total BTC trading globally.
The taxation approach in Brazil resembles that for the US IRS. The taxman also observes certain accounts, and some of the exchanges and brokerages are obligatory reporters. Simply holding BTC, however, does not generate a taxable event, despite the price fluctuations.
But revenue services around the world are also learning about the transparency of the Bitcoin network, and the potential to trace transactions directly. The technique, reserved for criminal investigations, is also known to the US IRS.
US IRS Extends Blockchain Exploration to Crack Down on Crime
One of the biggest crackdowns on BTC usage for 2019 happened in relation to the website Welcome to Video, a darknet network offering underage content. With the help of Chainalysis, the IRS and law enforcement managed to link BTC addresses to accounts and real-world identities.
“By analyzing the blockchain and de-anonymizing bitcoin transactions, IRS-CI special agents were able to identify hundreds of predators around the world – even though those users thought that they could remain anonymous,” the IRS reported.
BTC ownership and trading is regulated in vastly different ways. For most countries, recognizing a gain on selling the assets would be a reportable event. Rules differ on the time period of holding the asset, as US-based traders face differentiated taxes for short-term and long-term BTC investment.
The latest IRS annual report, details that the service has achieved a 91% conviction rate for crypto tax crimes in 2019 alone. This figure demonstrates the growing efforts of the tax authorities to clamp down on crypto tax dodgers.
Right now, Bitcoin has added more than 90% to its price since the start of 2019, but may also incur losses depending on the time of purchase and sale.
What do you think about Brazil’s approach to BTC transaction taxation? Share your thoughts in the comments section below!
Images via Shutterstock