Russian Tax Body Allows Payment of Taxes on Crypto Earnings

Russian Tax Body Allows Payment of Taxes on Crypto Earnings

Russian citizens can now pay taxes on their cryptocurrency earnings, despite the lack of legal status for crypto, as the Federal Tax Service recognizes it as property.

Key Points

  • Russian citizens can now pay taxes on their cryptocurrency earnings, despite the lack of legal status for crypto in the country.
  • The Federal Tax Service offers two taxation methods: declaring earnings on crypto income tax declarations or using the simplified taxation system.
  • The conflicting stance on crypto regulation within the Russian government has created an impasse, with some ministries supporting legalization while the Central Bank favors a ban.

The Russian tax body has announced that citizens can now pay taxes on their cryptocurrency earnings, despite the fact that crypto tokens have no legal status in the country. This move comes as the government sends mixed messages regarding its stance on crypto.

Two Different Taxation Methodologies

The Federal Tax Service (FTS) stated that individuals earning profits from crypto can declare their earnings on crypto personal income tax declarations or use the simplified taxation system (STS). V2B reported that the FTS made this announcement, giving crypto earners the option to pay taxes through these two different methodologies.

It is important to note that cryptocurrency currently has no legal status in Russia. The Central Bank of Russia even supports a ban on all forms of crypto-related activity, similar to the approach taken by China. However, government ministries such as finance, trade, and energy have expressed the desire to legalize and regulate crypto. This conflicting stance has created an impasse between the different government bodies.

Sanctions and Desperation

The situation is further convoluted by the sanctions imposed on Russia by the US and its allies. In an effort to de-dollarize and facilitate trade, some Russian companies have turned to buying and selling goods for crypto. In response to these challenges, the finance ministry proposed a compromise last week, which would effectively prohibit everyone in Russia, except for miners, from handling cryptocurrency.

However, the Federal Tax Service has introduced another unexpected element to the debate. The FTS stated that crypto can be recognized as a form of property and should be declared on tax returns accordingly. Despite the lack of legal status, the FTS acknowledged that cryptocurrency can be protected as “intangible property” under existing property rights.

Calculating Crypto Income for Tax Purposes

The FTS advised that income from the sale of cryptocurrency can be calculated using the documented costs of its purchase. It emphasized that tax calculations must be made in fiat rubles. Crypto traders are advised to submit a declaration using existing documents by April 30, 2024. Alternatively, traders can use the simplified taxation system, calculating their earnings by subtracting the purchase price from their incomes for sales.

The Russian tax body has taken a unique approach by allowing citizens to pay taxes on their cryptocurrency earnings, despite the lack of legal status for crypto in the country. This move has added further complexity to the ongoing debate surrounding the regulation of crypto in Russia. While the government ministries express interest in legalizing and regulating crypto, the Central Bank favors a ban. The conflicting messages and the impact of sanctions have created an impasse in the decision-making process. Nonetheless, the Federal Tax Service’s recognition of crypto as property provides clarity on how crypto income can be taxed for the time being.