In the last few months, the standoff between the Central Bank of Russia (CBR) and the country’s Ministry of Finance over crypto regulation has become the key regulatory plot for the Russian crypto community to follow. Simultaneously, however, another important legislative development has been unfolding somewhat under the radar: negotiations around tax code amendments that would make cryptocurrencies a taxable asset class. Here’s how it went down so far.
13% for individuals and 20% for companies
As the head of the State Duma’s (the lower chamber of Russian Parliament) financial markets committee, Anatoly Aksakov told local media on April 7 that the 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 a requirement to report digital asset transactions if their total exceeds 600,000 rubles, or around $8,000, per year and fines of up to 40% of the individual tax sum in case of non-reporting. The bill passed the first reading in February 2021, after which it got stuck in limbo for almost a year for reasons unknown.
Aksakov only mentioned the recent delay in the discussion around crypto tax amendments, pointing out Duma’s emergent task of crafting “anti-crisis policy” that has shelved the crypto regulation for a while.
The amendments awaited their fate as the broader discussion on the crypto regulatory framework between the CBR and the Finance Ministry ensued. While the central bank champions the idea of a direct ban on both crypto trading and mining, the ministry has offered its own vision to regulate rather than outlaw the industry. It seems that the CBR still stands by its restrictive position and the tax amendments won’t make an exception. A CBR spokesperson claimed that “digital assets are being used, among other things, to evade tax payments.”
Still, the estimates of potential federal tax revenue from crypto range from 10-15 billion rubles, or around $122-181 million, to 20 billion rubles, or around $244 million. The proposed tax would be imposed only on income — 13% on individuals’ personal income and 20% on legal entities’. Qualified investors would enjoy a tax deduction in the amount of 52,000 rubles or more per annum. The taxes are unlikely to apply to assets accumulated by 2021 but will hit Russian tax residents’ crypto transactions performed in any jurisdiction.
Starting somewhere
“This is an initiative of the Federal Tax Service, with support from the Ministry of Industry and Trade and a number of officials and former officials from the Ministry of Finance,” said Aleksandr Podobnykh, chief information security officer of 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 that the proposed tax amendments are part of a bigger picture of the regulatory clash between the CBR and the Ministry of Finance. He believes that the amendments will pass, opening “a lot of doors for developing products” in Russia.
The question remains whether Russian citizens holding digital assets — worth about $130 billion by the government’s own estimates — will be willing to get in line and whether the Federal Tax Service (FTS) will have the technical capacity to collect the taxes. Bychkov is not sure about the latter point but doesn’t see any other choice for the authorities but to start somewhere:
“My opinion is that the Russian system cannot be really ready, but it has no option but to build infrastructure step by step. As a Singapore taxpayer and resident, I can say that the 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 larger fight
Podobnykh said that collecting crypto taxes is not a huge problem currently….
Read More: cointelegraph.com