Followed by the rising popularity of cryptocurrencies, Brazil has just started to rule transactions of this emerging market.
It is important to highlight the recent Normative Ruling No. 1.888 published on May 7th, 2019 by the Brazilian Internal Revenue (“NR No. 1.888”), which regulates the obligation to provide details related to cryptocurrency transactions before the Brazilian Internal Revenue Service (“IRS”).
NR No. 1.888 outlines important concepts, as the definition of cryptoassets, of cryptoassets’ exchanges and the specification of which transactions shall be reported and what would be the penalties in case of non-compliance.
Additionally, the IRS, through its “Questions and Answers” Handbook related to the 2019 Income Tax Return, has already provided that cryptocurrencies should be reported as “Other Assets” on the “Assets and Rights Form”, by the original acquisition cost. In this regard, earnings above 35,000.00 BRL shall be subject to taxation – with progressive tax rates – as capital gains.
Alongside, there is a draft bill (No. 2.060/2019) pending approval of the Brazilian House of Representatives, which aims to establish a legal framework for cryptocurrencies.
Notwithstanding, the legal treatment applicable in Brazil is still rather non-existent, compelling investors to adopt certain precautions so as to ensure the right of transmission to heirs, avoiding risks due to the lack of State protection and to legal uncertainty.
Therefore, considering that heirs will face several difficulties to identify cryptocurrencies purchased by the deceased, as well as to obtain the key to access the wallets, it is essential that the principal establishes a clear and objective succession planning, so as to allow the heirs to be informed where to locate the platforms/systems used for their storage and how the technical access will be performed (access to keys, seeds, passwords).
In order to maintain security and privacy of the transmission of cryptoassets, the principal may also appoint third parties of his/her trust to assist the heirs with these assets.
On the other hand, it is crucial that the heirs only have access of key information related to access to cryptocurrencies after the death of the principal, especially to avoid risks of misuse of such access information and eventually of the digital assets.
In summary, the succession planning should be put into place by the principal as soon as possible and with due care, so that its provisions become efficient to serve the best interests of the estate and of the heirs.
