Russian government approves cryptocurrency taxation bill, exempting from value-added tax, with trading profits treated as securities income.

According to reports, the Russian Ministry of Finance has approved a draft law amendment to tax cryptocurrency transactions and mining. Highlights of the amendment include exempting cryptocurrency transactions from value-added tax, and combining cryptocurrency trading income with securities trading income for tax purposes. The personal income tax rate for this portion will not exceed 15%, which is a more relaxed regulatory stance on cryptocurrencies compared to countries like Japan and Italy where the tax rates can go up to 40%.

Russian Finance Ministry Decides: Cryptocurrency to Be Subject to 15% Income Tax

In this version of the draft, cryptocurrency is defined as property. Income from cryptocurrency obtained through mining will be calculated based on its market value, but expenses related to mining can be deducted from this income. Cryptocurrency transactions are exempt from value-added tax, and cryptocurrency trading income will be included in the same tax base as securities trading. This means that the maximum tax rate for individual income tax on cryptocurrency will not exceed 15%.

Furthermore, the amendment also requires miners to submit reports on the personal information used in their infrastructure to ensure the compliance of mining operations.

The Russian government first submitted the cryptocurrency tax bill No. 1065710-7 to the parliament in December 2020, and it passed the first reading in 2021.

In response, the Ministry of Finance of the country stated: "As a result of discussions with businesses, we believe that taxing the financial condition of mining operations is the most fair decision. This bill can maintain a balance between the interests of businesses and the state."

FTS Two-Stage Taxation Law: Taxation Starts from Deposit Address, Taxation Upon Transaction Depending on Circumstances

It is worth noting that previously, the Federal Tax Service of the country had taken tax actions on unrealized gains in mining. However, key points such as no value-added tax, as well as the disclosure of identities of mining industry employees, continue into the new amendment. At that time, the Federal Tax Service believed that there was no need to introduce a special system for mining, and Alexey Katyaev, head of the FTS Seventh Large Taxpayer Regional Inspection, stated: "For companies, traditional income tax will be levied, and for individuals, personal income tax will be levied."

At that time, the Federal Tax Service proposed to control the cryptocurrency industry through classical two-stage taxation. The first stage is when cryptocurrency is transferred to a registered taxpayer's address, taxation begins, which the Federal Tax Service refers to as a prepayment for mining cryptocurrency.

The second stage tax rate is imposed when the transaction occurs. For example, if the currency price has risen since the first tax payment, the company will pay tax on the profits. However, if the price falls, the difference will be treated as a loss.