NFTs in Income Tax 2022: Learn How and When to File

In the last year alone, non-fungible tokens (NFTs) have exploded and become a multi-billion dollar sector of the crypto industry. Large collectors’ items, such as Cool Cats and rare pieces from the Bored Ape Yacht Club, sell for $100,000 or more.

NFTs have always attracted the curiosity and money of many. And opinions are divided: not everyone understands the value of 5-bit or 6-bit jpeg images, and enthusiasts of the subject see its usefulness.

Since NFTs create an indestructible digital record of ownership on the blockchain (the same technology as cryptocurrencies), digitally tagged artwork can also serve as membership cards for exclusive online clubs, gaming communities, Discord rooms, and interactive experiences.

But it is true that in practice, NFTs are still very new and not everyone understands the subject in depth. Doubts may grow if taxpayers are required to report acquisitions of NFTs in their 2022 income tax.

That’s one of the novelties of this year’s Income Tax Builder program – there’s a code specifically for NFT.

According to the IRS, many taxpayers are confused when it comes to choosing the type of assets they own, so the new scheme is being restructured into asset groups, each with a specific and targeted code. Of these, the Cryptocurrency group now has a code that only applies to NFTs.

However, before going step by step, it is important to understand when taxpayers need to notify NFTs.

What are the rules for claiming NFTs?

According to Edemir Marques de Oliveira, a tax attorney and partner at Marques de Oliveira, the rules for filing NFTs are the same as those for cryptocurrencies in general.

Capital gains from trading cryptocurrencies such as NFTs are taxed whenever total sales exceed BRL 35,000 per month.

This profit is subject to the general capital gains rules. So the table is a table for progressive annual taxes:

income tribute
Below 5 million reais 15%
Between 5 million and 10 million reais 17.50%
10 million to 30 million reais 20%
more than 30 million reais 22.50%

Tax collection through Darf using income code 4600 must be made by the last business day of the month following the transaction.

Therefore, monthly sales of NFTs up to R$ 35,000 are exempt from income tax.

However, it is worth remembering that this restriction takes into account a group of crypto assets or virtual currencies traded in Brazil or abroad, regardless of their type (Bitcoin, NFT, Ethereum, etc.), and also involves the exchange of crypto assets, i.e. No need to convert to Real or other fiat currencies.

Therefore, if these operations collectively generate capital gains in excess of R$ 35,000 during the month, that amount will also be taxed.

On the other hand, NFTs that are not sold and held by the filer are not taxed by the IRS, but must be inserted into the income tax return.

If the acquisition value is equal to or greater than R$ 5,000.00, the taxpayer is obliged to inform the holding of the NFT.

Also read:

How to inform NFT in the statement?

To report holding NFTs, taxpayers must:

  • Access the “Assets and Rights” table, then select group “08 – Cryptoactives”, then select code “10 – Cryptoactives known as NFTs (Non-Fungible Tokens)”;
  • It must inform the holder whether it is the holder or a dependant, and where;
  • In the “Discrimination” field, in addition to the name of the hosting company and the CNPJ, you need to specify information about the NFT, such as: the type and number of assets. If you keep it yourself, please inform the digital wallet model used (Ledger nano, Ledger X, Trezor, etc.);
  • If purchased in 2021, taxpayers can leave it at zero on “December 31, 2020”; and on December 31, 2021, you must inform the acquisition value of the cryptoasset, not the current market value;

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