In a move to regulate the growing cryptocurrency market, Russia’s Ministry of Finance has proposed a new tax scheme for cryptocurrency owners. The plan outlines tax obligations for both individuals and legal entities, including exchanges and mining farms. Deputy Finance Minister Alexei Moiseev announced that the new regulations will appear in a draft law amending the Tax Code. The State Duma has already approved it in its first reading.
Key Highlights of the Proposed Cryptocurrency New Tax Scheme
- Tax on Cryptocurrency Revaluation for Legal Entities: The new tax scheme introduces a tax for legal entities, including crypto exchanges, mining farms, and companies holding cryptocurrency assets. The Ministry of Finance stated that companies must revalue their cryptocurrency holdings by July 2022, even if they haven’t sold their assets. However, the exact tax rate has not been revealed. This revaluation will be subject to taxation based on the updated value of the cryptocurrency on their balance sheets.
- Personal Income Tax on Cryptocurrency Sales: The Ministry of Finance has proposed a 13% personal income tax on profits earned from the sale of cryptocurrency as part of the new tax scheme. This tax would be applicable after the sale, and individuals would be required to pay the tax by July 15 of each year. This initiative aims to regulate cryptocurrency profits more clearly while simplifying the taxation process for individuals.
- No VAT or Property Tax: To encourage more companies to comply with the new tax scheme, the Ministry has proposed not to impose VAT or property tax on cryptocurrencies. This exemption incentivizes businesses to establish a presence in Russia, boosting domestic cryptocurrency-related activities and fostering industry growth.
Impact on Tax Revenues from Cryptocurrencies
The Ministry of Finance estimates that the new cryptocurrency taxes could generate 10-15 billion rubles annually for the Russian state budget. Most of this revenue is expected to come from miners, who have become increasingly significant in the country’s crypto landscape. Earlier reports, including a February 6, 2022, report from The Bell, suggested that the government could potentially collect up to 1 trillion rubles annually from the broader crypto market.
Regulatory Developments and Government Plans
On February 8, 2022, the Russian government approved the Ministry of Finance’s plan for a new tax scheme to regulate cryptocurrencies. The Ministry of Finance and the Central Bank must prepare a joint bill by February 18, 2022. This bill will further shape the country’s cryptocurrency regulatory framework. The collaboration between financial authorities highlights the increasing importance of regulating digital assets in Russia.
Limiting Cryptocurrency Purchases for Unqualified Investors
In a separate move, the Ministry of Finance also proposed a limit on cryptocurrency purchases for unqualified investors. The proposal limits these individuals to purchasing up to 50,000 rubles of cryptocurrency annually. This measure protects inexperienced investors from excessive risk in the highly volatile crypto market.
Conclusion: A Significant Shift in Cryptocurrency Regulation
Russia’s evolving approach to cryptocurrencies reflects the government’s goal to integrate digital assets into the formal economy. The new tax scheme aims to ensure proper tax measures are in place. The Ministry of Finance and the Central Bank are working together to create a unified bill. This sets the stage for increased oversight and regulation in the crypto market.
With the potential to generate billions in tax revenue, this initiative marks a significant shift in how Russia views cryptocurrencies. Whether it leads to more widespread adoption or increased scrutiny is still uncertain. However, one thing is clear—Russia has firmly placed cryptocurrency regulation on its agenda.