Brazil has made a grim shift in its approach to taxation of cryptocurrencies, demanding broad tax alterations that are rather surprising. As per recent reports, the change comes pursuant to Provisional Measure No. 1303, a recent directive issued by Brazil’s Finance Minister. 

Under this directive, crypto investors will be required to pay 17.5% taxation on profits gained on cryptocurrency investments. However, unlike in the previous regime where small retail investors were exempt, the new rate will be applicable to all investors irrespective of their portfolio size.

Brazil’s Shift From Tiered Taxation

Previously, Brazil had a progressive tax system for crypto profits. Investors only started paying taxes when their monthly gains exceeded R$35,000 (approximately $6,298 USD). Even then, they were subject to a gradual scale of 15% for gains up to R$5 million annually. Although this increased up to 22% for crypto profits exceeding that threshold. Nonetheless, this structure provided a degree of protection to the small scale investor yet large profits were taxed at the higher rates.

But as per a recent local report, that distinction will no longer exist under the new system. Rather, a flat rate of 17.5% will apply to all crypto investors in Brazil irrespective of their annual returns. 

Governo derruba isenção sobre lucros com criptomoedas e fixa imposto de 17,5% https://t.co/OxrGFOOqOg

— Portal do Bitcoin (@portaldobitcoin) June 12, 2025

While this rate is lower than the previous top-tier tax, it eliminates exemptions of small crypto traders who used to pay nothing unless they exceeded the income limit. This means that new market entrants and low-volume investors will now have a greater tax burden since the effective tax rate will be higher than before. 

New Brazil Tax Rules Face Criticism 

Brazil’s new move to have a base tax rate for all crypto investors without tier exemption is rather surprising. However, the government claims that it comes as part of a wider shakeup in Brazil‘s fiscal policy that also involves changes to fixed-income securities and gambling taxes. Although this is a move towards homogenization and equality, critics believe that the effects of the changes will have a negative effect on retail investors. 

“How are we going to raise taxes? Let’s call everyone rich…Let’s say we are “correcting distortions” and doing “social justice.” “The rich have to pay more taxes” -> Put 17.5% income tax on cryptos. As if only the rich buy cryptos lol,” a Brazilian crypto trader posted on X. 

There is criticism that it might even centralize crypto activity to the financial elites in Brazil. Consequently, observers regard the flat rate as an instrument that could undermine the principles of progressive taxation. 

“This taxation on cryptos is not an isolated measure… in practice, those who feel these “tax blows” the most are the middle class. What I want you to understand is that crushing the middle class is part of the socialist ideal, and the easiest way to do that is to continue with regressive taxes and limit the gains of “popular” financial assets,” another crypto enthusiast wrote. 

The new flat rate crypto tax in Brazil can be counter-productive in case it suppresses the participation in crypto at the grassroots and concentrates the market influence in the hands of richer investors. While the nation is attempting to strike a balance between its fiscal requirements and the mounting significance of digital assets in its economy, the resolution of this policy could define the future of the crypto industry in the country.