Tax laws

Russia to Include Cryptocurrencies in Updated Tax Laws

Russia to Include Cryptocurrencies in Updated Tax Laws

New Tax Rules Could Make or Break the Way for Wider Crypto Adoption in Russia

By Shashank Bhardwaj

Image: Shutterstock

Jhe federal government of Russia would have proposed a bill in the State Duma (lower house of the Russian parliament) establishing rules for the taxation of cryptocurrency transactions. The bill will likely make necessary changes to Russia’s tax system to address a number of unanswered questions.

On Thursday, April 7, Anatoly Aksakov, Chairman of the State Duma Financial Markets Committee, informed local media that crypto-related federal tax code amendments are expected to be adopted by the end of the parliamentary session. of summer.

While the Russian central bank advocates a complete ban on crypto trading and mining, the ministry has proposed regulation rather than an outright ban. However, the CBR (Central Bank of Russia) seems to be sticking to its restrictive stance, and tax changes will be no exception. “Digital assets are used, among other things, to evade tax payments,” a CBR spokesperson said.

The proposed tax laws gain significance in light of the current situation where Russians recognize the potential for using cryptocurrencies to circumvent EU and US sanctions imposed in response to the invasion of Ukraine by country. For sanctions to be effective, banks and other financial institutions generally need to track the movement of money so that transactions involving sanctioned entities can be prevented. Cryptocurrencies, however, could allow Russia to bypass the financial system altogether, making it impossible to trace transactions.

The estimated federal tax collection for cryptocurrency ranges from 10-15 billion rubles ($122-181 million) to 20 billion rubles ($244 million). Only income would be subject to the proposed tax, which would be imposed at a rate of 13% on the personal income of natural persons and 20% on legal persons. Accredited investors would be entitled to a tax deduction of at least 52,000 rubles ($650) per year.

The government-backed legislation also contains an obligation to report digital asset transactions of more than 600,000 rubles ($8,000) each year, as well as a penalty of up to 40% of the individual tax sum if they are not declared.

On Wednesday April 20, the local newspaper Izvestia reported that the Federal Tax Service had provided official comments on the Ministry of Finance’s proposed cryptography law. The tax agency reportedly suggested in its remarks that Russian companies be allowed to use cryptocurrency for specific operations: “To enable companies to pay for goods and services in accordance with foreign trade contracts and to receive income from ‘foreign digital currency entities’.

Given how quickly the pressure to enact crypto laws has been building among several Russian government stakeholders, passing the tax reforms by late spring, as Aksakov said , seems extremely likely.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash