Brazil’s Proposed Flat Crypto Tax Sparks Debate

Brazil’s Congress is debating Provisional Measure 1303/25, a tax reform that could reshape the nation’s crypto landscape. The proposal introduces a flat 17.5% tax on all crypto gains, eliminating the current progressive system that ranges from 15% to 22.5%. It also abolishes the monthly exemption on transactions under R$35,000 ($6,500), meaning even small trades would now be taxed.

The government enacted this measure in June to offset revenue shortfalls after a failed attempt to increase the Financial Transactions Tax (IOF). If approved, the new system will take effect in January 2026. Supporters argue it simplifies taxation, but critics warn it unfairly burdens small investors while favoring high-net-worth individuals who previously paid higher rates.

Fabio Plein, Coinbase’s Regional Director for the Americas, emphasized that retail investors would face the heaviest impact, while the wealthiest would see tax relief. He compared the measure to Brazil’s defunct CPMF tax, noting it could treat minor crypto purchases like taxable trades.

Adding to concerns, the reform introduces a Withholding Income Tax (WHT) on crypto activities, such as staking and DeFi services. This could force platforms to liquidate user assets to cover taxes, creating liquidity issues. Non-resident investors would also face WHT, while securities remain exempt—potentially diverting foreign capital away from crypto.

With over 25 million Brazilians already engaged in crypto and projections of 70 million users by 2026, the stakes are high. Critics fear the flat tax could drive innovation abroad, reduce liquidity, and push users toward unregulated platforms.

Congress is expected to vote between September and October. If passed, the measure will shape not only Brazil’s fiscal strategy but also its role in the global crypto economy.