Brazil has shocked the crypto community by eliminating tax exemptions for small crypto profits and enforcing a 17.5% flat tax on all digital asset gains. The sweeping reform, introduced under Provisional Measure 1303, is part of the government’s broader push to increase tax revenues from financial markets.

Previously, Brazilian investors could earn up to 35,000 reals (around $6,300) in monthly crypto sales without paying taxes. Now, that exemption is gone. The flat 17.5% tax replaces the old tiered system, where gains were taxed between 15% and 22.5% depending on volume. This change means small investors will pay more, while wealthy traders may benefit from reduced effective rates.

The new law doesn’t stop at exchanges. Self-custodied assets and crypto held abroad will also be taxed. These changes broaden the scope significantly, pulling more crypto users into the tax system. Taxes will be calculated quarterly, and losses can be deducted—but only from the past five quarters, a limit that tightens further starting in 2026.

Other financial assets are affected too. Previously untaxed instruments like LCAs, LCIs, CRIs, and CRAs will now face a 5% tax on profits. Betting revenue will also see a hike from 12% to 18%.

These tax reforms come after public resistance forced the government to drop a proposal to raise the Financial Transaction Tax (IOF).

Meanwhile, Brazil is considering a bold move to allow salary payments in Bitcoin. A draft law proposes letting employers pay up to 50% of wages in crypto, with full crypto payments allowed for contractors or foreign workers under certain conditions. All crypto wage payments must be processed using Central Bank-approved exchange rates.