Cryptocurrency taxes – in the Russian Federation and other countries

The governments of all states are racking their brains over the rules for regulating cryptocurrencies in an effort to cover all conceivable nuances of their use, production, sale and purchase. After all, today it is impossible to deny that virtual money is beginning to exert the most serious influence not only on the economy, but also on other spheres of our life.

In each country, interaction with cryptoassets is seen differently – some completely prohibit them, while others give them the status of the second state currency. How is the situation developing in Russia, what taxes do citizens pay on cryptocurrency? And how does this practice compare with what is happening in other states?

What laws on cryptocurrencies exist in the Russian Federation?

In 2021, Russia adopted Law No. 256-FZ “On digital financial assets, digital currency and on amendments to certain legislative acts of the Russian Federation.” According to this document, there are two official definitions:

• digital currency (it is issued within the framework of the mining protocol);
• digital financial asset (has a specific issuer and is issued by a specific company).

Russian legislation recognizes digital currency as property, so any income from it for individuals implies the payment of personal income tax, and for legal entities – income tax.

Taxable transactions

It should be noted that ordinary storage of tokens or altcoins is tax-free. Thus, if a user bought and deposited a couple of dozen bitcoins into the wallet in the long term, there would be no need to pay to the treasury. However, taxes on cryptocurrency will need to be paid when it is sold for a larger amount than was spent on the purchase. So, when do you need to pay taxes?

Operations for the purpose of generating income

When a cryptocurrency is sold on an exchange, its holder receives a certain amount of taxable income. However, in this case, you can not pay for the entire amount received, but deduct the costs of acquiring the asset, and then pay tax. In the same way, taxes are charged and paid when exchanging cryptocurrencies for fiat on P2P exchangers.

Derivative transactions (options or futures) are also made with digital assets. And although in this situation the cryptocurrency is not converted into real money, the owner receives a certain percentage of the income in virtual coins, presented in kind. In this case, it is necessary to pay tax on the additionally received part of the currency. The calculation should be made at the time of purchase.

When buying and selling digital assets for foreign currency, it should be converted into rubles at the exchange rate at the time of the transaction. Further, when selling by individuals, the exchange rate revaluation is made. There are no requirements for legal entities in this regard. They only pay out value gains in the event of a sale, since the entire positive balance will be considered income.

It should be noted that transactions between pairs of cryptocurrencies that are made on the exchange and at the same time are not withdrawn to fiat are not subject to taxation. Payments are made at the time of withdrawal of rubles, dollars or euros – to a card or in cash.

Individuals declare cryptocurrencies once a year. Legal entities perform such an operation every month or quarter.

Implementation of the donation procedure

According to the Civil Code, such a procedure is considered a donation of property. Therefore, the donor does not pay tax. The recipient is obliged to pay personal income tax from the market value of the gift. This does not apply to close first line relatives – for example, spouses, parents, children.

What tax rate is relevant for legal entities and individuals?

The tax on the sale of cryptocurrency or other operations that resulted in the receipt of profit is paid separately by both individuals and legal entities – in accordance with the Tax Code of the Russian Federation. The amount of payments is as follows:

• Individuals are required to pay income tax, i.e. personal income tax. A tax return should be filed once a year, indicating in it all transactions related to cryptocurrency. The rate is different – this can be either 13% or 15%. Tax is calculated on income, that is, on the difference between the purchase and sale of the asset. Usually the rate is 13%, but if the income exceeds ₽5 million per year, it rises to 15%.
• Cryptocurrency taxes for legal entities are formed in accordance with the Tax Code of the Russian Federation. Income tax is paid at a rate of 20% – exactly as in other similar transactions.
• Tax payment for individual entrepreneurs depends on the choice of the simplified taxation system (STS). With the STS “Income” payment is made at the rate of 6% of all income received for the financial year. With the simplified tax system “Income minus expenses”, tax is paid at 15% of the difference. The latter system is efficient for mining.
• The self-employed payout is 4%. The owner of a cryptocurrency can apply for this status, since digital money is considered property. You must pay taxes once a month. However, if your income exceeds ₽2,400,000 per year, you will have to change your status.

Interestingly, according to the current legislation, the owner of the cryptocurrency may not provide information about its origin, but simply submit a declaration of its presence. Also, a wallet with digital currency can be issued for a child, in which case the payment of taxes is passed on to the shoulders of adult relatives.

Responsibility for violation

In Russia, it is forbidden to use cryptocurrency as a means of payment in any areas (provision of services, sale of goods, remuneration of labor by an employer). That is why employees of companies and organizations cannot accept wages in bitcoins or other coins, store owners cannot set the cost of goods in crypto. All of this falls under illegal digital asset transactions.

In case of violation, a fine is imposed:

• for individuals – from ₽20,000 to ₽200,000;
• for legal entities – from ₽100,000 to ₽1 million;
• for officials – from ₽50,000 to ₽400,000.

Also, a new article is currently being developed for the Criminal Code of the Russian Federation. According to the plan of its creators, imprisonment for up to three years can be imposed for carrying out operations on a large and especially large scale. The transactions that the owner of the cryptocurrency made over the past three years will be taken into account.

It should be noted that an employee of a foreign company can receive wages in cryptocurrency only if the employment contract is drawn up in accordance with the legislation of the country of residence of such a company. This document confirms the legality of receiving digital currency. And under Russian law, such a transaction will be considered a transfer of property as a gift, so the employee will have to pay tax.

It should be understood that tax authorities will not be able to find out about the existence of a crypto wallet or digital currency accounts if the declaration of cryptocurrencies has not been carried out. Transfers to a personal card in small amounts and rare payments – say, up to RUB 50,000 – the fiscal authorities can also miss. However, interest can be aroused by:

• regular transfers to the card from different persons, provoking questions of the expediency of specific transactions;
• instant withdrawal of money – within a day after receipt;
• carrying out transit operations, that is, after the money is credited, the person almost immediately sends them to another account;
• constant withdrawal of money from the card and the absence of expenditure transactions on it.

That is why, when deciding to trade cryptocurrencies or perform any operations with cryptoassets aimed at increasing your capital, it is recommended to formalize this activity in a legal way. It is important to save receipts, documents and take screenshots that can confirm the legality of transfers.

It is also necessary to understand that the right to judicial protection can be obtained only if the owner of the cryptocurrency has properly informed the state about its availability. In other words, in case of theft of coins, the person who has not paid the tax on the sale of cryptocurrency is deprived of the right to protection.

Regulation of cryptocurrencies in foreign countries

Each country has its own attitude towards digital assets. Some people positively perceive virtual currencies and all kinds of operations with them. Others completely prohibit their use and extraction in their jurisdiction. However, cryptocurrency taxation exists in many countries.

• Salvador… This is the first country to recognize bitcoin as a means of payment on a par with the US dollar. This decision brought the Latin American state worldwide fame, and the decisive act was discussed by all the media. The President of the country justified this decision by the fact that many residents work abroad, and earnings are transferred to their homeland, and bitcoin will reduce the cost of these operations. In general, concern for citizens is logical and commendable.
• USA… The attitude towards cryptocurrencies in America is ambiguous, and in different states the legislation on this matter can differ significantly. Digital money is viewed as an exchange commodity, property, or a type of money. At the same time, cryptocurrencies are taxed at rates of 15–35%. There are a number of individuals who are exempt from paying taxes.
• Japan… In the country, support for cryptocurrency and the development of this area has been going on for a long time. The legalization of bitcoin dates back to 2016: then BTC became a virtual means of payment, but not a currency in legal terms. Only in 2017, bitcoin was legalized as an official means of payment.
• Ukraine… In the country, in the second reading, the law “On virtual assets” was adopted, which implies the determination of the legal status of the crypt. In theory, the legal operation of international exchanges is possible, and the owners of assets will be able to legally protect them. Interestingly, the law does not specify the mechanisms and procedures for interacting with cryptocurrency, that is, it implies its revision. In addition, the president returned the law to parliament for reconsideration.
• Kazakhstan… In the country, only in 2020 a law was introduced, which describes the issues of regulation of cryptocurrencies. It separates mining from the issuance and circulation of virtual assets. Today virtual currencies have the status of property and can be used as a means of payment.
• Belarus… Since 2017, cryptocurrency in the country has been legalized on the basis of Decree No. 8, and citizens are exempted from paying taxes for any transactions with digital assets until 2023.
• Germany… Among the countries of the European Union, it was she who began to regulate cryptocurrency at the legal level. Mining, trading and digital currency ownership are allowed in Germany. Today in the country it is possible to pay with bitcoins.

The law is not so terrible as it is interpreted

In general, no state can boast of perfectly written legislation on digital assets – taking into account all the nuances and loopholes. Everywhere you can find flaws and turn the situation in your favor. In addition, operations with cryptocurrencies are difficult to track, which criminals are actively using. This is why some countries prohibit digital currencies in any form. These include:

• Turkey… Here, in early 2021, they announced a ban on financial transactions with digital assets. As a result, the largest crypto exchange, Thodex, was closed.
• Vietnam… It is forbidden to use bitcoin as a means of payment, but it can be stored as a digital asset.
• Egypt… At the legislative level, the ownership of digital assets is prohibited, both for individuals and legal entities.
• China… Individuals can own cryptocurrencies, but organizations are completely prohibited from using them as a means of payment. The memories of the ban on mining and the closure of exchanges are fresh in my memory.

It is quite possible that in the near future the legislature will understand that it is impossible to escape from the rapidly changing world. Cryptocurrency is and will be – as long as there is a possibility of its creation or production.

Keeping an eye on the pulse is the strategy of competent legislators who seek to minimize the outflow of money into the shadow economy and interrupt the chain of payments for illegal goods and services.