Tax code

This is what the rules might look like

Over the past few months, the standoff between the Central Bank of Russia (CBR) and the country’s Ministry of Finance over crypto regulation has become the top regulatory conspiracy for the Russian crypto community to follow. Simultaneously, however, another important legislative development has been going somewhat under the radar: negotiations around changes to the tax code that would make cryptocurrencies a class of taxable assets. Here’s how it’s gone so far.

13% for individuals and 20% for companies

Head of the Financial Markets Committee of the State Duma (the lower house of the Russian Parliament), Anatoly Aksakov Told local media on April 7 that amendments to the federal tax code regarding crypto are expected to pass by the end of the summer parliamentary session.

The government-backed legislation includes an obligation to report digital asset transactions if their total exceeds 600,000 rubles, or about $8,000, per year and fines of up to 40% of the individual tax sum in case of non-declaration. The bill passed first reading in February 2021, after which it was stuck in limbo for almost a year for unknown reasons.

Aksakov only mentioned the recent delay in discussing crypto tax changes, pointing to the Duma’s emerging task of crafting an “anti-crisis policy” that sidelined crypto regulations for a while. some time.

The amendments awaited their fate as the broader discussion on the crypto regulatory framework between the CBR and the Ministry of Finance ensued. While the central bank pushes the idea of ​​a direct ban on crypto trading and mining, the ministry has offered its own vision to regulate rather than outlaw the industry. It looks like the CBR is maintaining its restrictive stance and the tax changes will be no exception. RBC spokesperson claims that “digital assets are used, among other things, to evade tax payments”.

Still, estimates of potential federal tax revenue from crypto range from 10-15 billion rubles, or about $122-181 million, to 20 billion rubles, or about $244 million. The proposed tax would be imposed only on income — 13% on personal income for individuals and 20% on corporations”. Qualified investors would receive a tax deduction in the amount of 52,000 rubles or more per year. The taxes are unlikely to apply to assets accumulated by 2021, but they will affect crypto transactions of Russian tax residents made in any jurisdiction.

start somewhere

“This is an initiative of the Federal Tax Service, with the support of the Ministry of Industry and Trade and a number of officials and former officials of the Ministry of Finance,” said Aleksandr Podobnykh , head of information security at digital asset firm Security Intelligence Cryptocurrencies. Platform (SICP), explained to Cointelegraph.

Alexander Bychkov is the CEO of global crypto debit card provider Embily and pays his taxes in Singapore. Bychkov said the proposed tax changes are part of a larger picture of the regulatory dispute between the CBR and the Ministry of Finance. He believes the amendments will pass, opening “many doors for product development” in Russia.

The question remains whether Russian citizens holding digital assets – worth around $130 billion by the government’s own estimates – will be willing to queue and whether the Federal Tax Service (FTS) will have the technical capacity to collect taxes. Bychkov isn’t sure about that last point but sees no other choice for the authorities but to start somewhere:

“My opinion is that the Russian system cannot be really ready, but it has no choice but to build infrastructure step by step. As a taxpayer and resident of Singapore, I can say that tax legalization of crypto helps Singapore to be one of the most developed market economies, with one of the highest GDP per capita in the world.

In the shadow of a bigger fight

Podobnykh said collecting crypto taxes is not a huge problem right now. He commented:

“Since December 2021, when filing a tax return, you can choose digital assets and indicate the profit from them. Another problem is the exchange of one crypto asset to another and the calculation of profits. Here, the solution lies in revenue-calculation services, eventually integrated with exchanges and auditable for interested parties.”

As both experts agree, the process of institutionalizing crypto taxation through amendments to the tax code has no special meaning in the context of the standoff between the CBR and the Ministry of Finance over the fundamental approach of regulation of digital assets. This is consistent with recent statements by Finance Minister Anton Siluanov, who underline secondary importance of the tax collection regime to a more general regulatory framework.

Given the momentum that the Ministry of Finance’s approach to bringing crypto into the regulatory perimeter has recently gained among many stakeholders in the Russian government, the passage of the tax changes by late spring , as Aksakov promised, looks like a very realistic schedule. .