How to Report Prediction Market Gains Earned Abroad

A Brazilian resident who earns on foreign prediction markets must report the result in the annual tax return if the contract qualifies as a financial investment abroad. In that case, Law No. 14,754/2023 (Lei 14.754/2023) sets 15% on a separate form. The law does not name prediction markets, so check how your contract is classified.

Who must report gains from prediction markets made abroad?

An individual resident in Brazil reports income from capital invested abroad in the Annual Adjustment Tax Return, separately from other income and from capital gains (Law 14,754, art. 2). The law treats as a financial investment abroad "any financial operations outside the country," and its list of examples includes financial instruments, virtual assets, digital wallets and derivatives (art. 3, § 1, I).

Prediction markets do not appear on that list. What decides the matter is the nature of the contract you traded and where it was traded. If the contract is a derivative or another financial instrument on a foreign platform, art. 3 is the starting point. Ask a professional to classify the contract before you fill in the return.

The fact that the platform or the contract is irregular in Brazil does not erase the tax. The National Tax Code (Código Tributário Nacional, CTN) says the legal definition of the taxable event must be interpreted regardless of the legal validity of the acts performed and the nature of their object (CTN, art. 118, I). The rules on what can be offered in the country have their own article: prediction markets in Brazil. This article covers only how to report.

What is the rate and what counts as income?

The tax is 15% on the annual portion of the income, in the annual adjustment, with no deduction from the tax base (Law 14,754, art. 2, § 1). Income includes, among other things, the remuneration produced by the investment, gains on secondary-market trades, and the exchange-rate variation of the foreign currency, or the variation of the cryptocurrency against the national currency (art. 3, § 1, II).

In practice, this means that:

• •a gain in dollars or crypto is converted to reais, and the exchange-rate variation on the principal enters the calculation;
• •the gain in reais can be larger or smaller than the gain in the platform's currency, depending on the exchange rate over the period;
• •the result is determined in the annual adjustment, on a separate form, and not under another regime (art. 2).

When is the gain recognized?

Income goes into the return for the period in which it is actually received. For gains, including exchange-rate variation on the principal, the moment is the redemption, amortization, disposal, maturity or settlement of the investment (Law 14,754, art. 3, § 2).

For those who trade contracts that expire, this matters in the routine. Keep the date and value of each settlement, with that day's exchange rate, because the year's calculation depends on these records.

Can I offset losses against gains?

Yes, within what the law provides. An individual can offset realized losses on financial investments abroad, when proven by proper and reliable documentation, against income from investments abroad on the same form of the return, in the same period (art. 9). The law adds that:

• •if losses exceed gains, the excess can be offset against profits and dividends of controlled entities abroad computed in the same return (art. 9, § 1);
• •accumulated losses that were not offset can be offset against income in following periods (art. 9, § 2);
• •each loss can be offset only once (art. 9, § 3).

Without statements and a transaction history, a loss cannot be proven. That is why organizing your documents matters as much as the calculation.

Can I deduct tax paid abroad?

Only in two cases: when an international agreement, treaty or convention with the country of origin provides for the offset, or when there is reciprocal treatment for income produced in Brazil (Law 14,754, art. 4). The deduction cannot exceed the difference between the individual income tax (IRPF) calculated with the income and the IRPF due without it (art. 4, § 1).

Tax that can be reimbursed, refunded or offset abroad cannot be deducted (art. 4, § 3), and what is not deducted in the year does not carry over to other years (art. 4, § 4). Confirm case by case whether there is a basis for the deduction before claiming it.

What other reports may be required?

Besides income tax, two information obligations can reach those who trade abroad.

Brazilian Capital Abroad report (CBE). Resolution BCB 279/2022 lists, among the information to be provided, virtual assets and derivatives traded abroad (art. 7, IX and X). The annual report is mandatory when total Brazilian capital abroad reaches USD 1,000,000.00 or more on December 31 (art. 10). The Central Bank of Brazil (BCB) states fines from BRL 2,500.00 to BRL 250,000.00 for failing to report, on the CBE page.

DeCripto. If the operation uses crypto-assets through a provider abroad, IN RFB 2,291/2025 requires an individual or entity resident in Brazil to provide information whenever the monthly value of operations, alone or combined, exceeds BRL 35,000.00 (art. 5, II, "a", and § 3). Transmission is monthly, by the last business day of the following month, and annual, by the last business day of January of the following year, depending on the type of information (art. 12). The topic is covered in cryptocurrencies and offshore structure.

What changes if I trade through a company abroad?

It changes how the income is taxed, not the obligation to report. Law 14,754 treats as controlled the companies and other entities in which the individual has a majority of the votes or more than 50% of the capital or profits (art. 5, § 1). The controlled entity's profit is taxed on December 31 of each year when it is in a favored-taxation country or privileged regime, or when its own active income is below 60% of total income (art. 5, § 5). Income from financial investments does not count as own active income (art. 5, § 6, I, "g").

A company created only to trade contracts can therefore fall under the regime that taxes on December 31, without waiting for a distribution. The structure also does not, by itself, resolve the regulatory question covered in the article on prediction markets in Brazil. For the general design, see international holding company and how to report offshore in income tax.

Which documents should I keep?

The law requires proper and reliable documentation to prove losses (art. 9) and to convert tax paid abroad, using the closing rate published by the Central Bank of Brazil for the payment date (art. 4, § 2). In prediction markets, the prudent minimum is to keep:

1. •platform statements with all of the year's operations, including those settled at a loss;
2. •proof of deposits and withdrawals, in currency or crypto, with date and value;
3. •the settlement date of each contract, to know in which year the result counts;
4. •the exchange rates used in the conversion to reais;
5. •the balance on December 31, for the asset declaration and for the CBE.

If you want to review your situation, the tax planning service and the compliance review check it against your history.