The Russian government is preparing to exempt cryptocurrency trading and custodial services from value-added tax (VAT) as part of a major push to regulate coin operations in the country.
The necessary legislation has been drafted already. It also determines the taxation of profits generated by entities engaged in these activities and of the personal income of digital currency traders.
Russia won’t collect VAT on crypto trading and storage services
The Ministry of Finance in Moscow has put forward amendments to Russia’s Tax Code to address the taxation of various crypto transactions of both businesses and individuals.
A key proposal is to exempt the services offered by cryptocurrency exchanges and digital-asset depositories from VAT, local media unveiled.
The exemption will also cover other ancillary services related to the issuance and trading of digital currencies, according to a source familiar with the bill.
The tax will not be levied at “digital rights certifying exclusively monetary claims” either, the official who chose to remain anonymous told the Interfax news agency.
The full list of exemptions is yet to be finalized by the finance ministry, the crypto news outlet Bits.media noted in a report on Saturday.
The profits of crypto exchange and custody platforms will be subject to corporate taxation under rules similar to those for professional participants in the securities market.
That includes revenue from charged commissions, fees for storing digital assets and the provision of intermediary services, as well as other operating income.
The legislation does not envisage preferential treatment in these cases, and Russia intends to generally apply its standard tax regimes, taking into account certain specifics.
Bill regulates taxation of crypto-related income of individuals
The draft law introduces a new article regulating the procedure for collecting tax on personal income from the sale or other disposal of cryptocurrency, including exchange for fiat.
Russian crypto traders will be able to reduce their tax base with acquisition costs and fees paid to exchanges, depositories, brokers, and banks, and deduct any taxes paid upon receipt. The document further details:
“When income is received from digital currency transactions, expenses in the form of acquisition costs are recognized at the first-in-first-out rate.”
The bill allows for the offsetting of profits and losses within a single tax period, but the carryover of losses to future periods will not be permitted.
Intermediaries such as brokers and trustees will be responsible for withholding and transferring the tax to the state budget if the income is deposited into an account with them.
Restrictive regulations to limit cryptocurrency trading in Russia
Russia’s crypto market is rarely given tax breaks, while restrictions are more common, the biz-tech portal VC.ru remarked in a post on the upcoming regulations.
Indeed, the Russian government is preparing to legalize cryptocurrency transactions, including trading and investment, under strict rules and limitations.
This week, the federal government filed a package of draft laws, including the main bill “On Digital Currency and Digital Rights,” with the State Duma, which is expected to adopt them by July 1.
While they expand access to crypto assets to include non-qualified investors, ordinary Russians who fall in that category will be allowed to buy no more than $3,700 worth of coins a year.
Besides, they’ll be permitted to purchase only the largest and most liquid cryptocurrencies like Bitcoin, Ethereum and a few others, whitelisted by the Central Bank of Russia.
Furthermore, all cryptocurrency transactions will be channeled through service providers licensed under Russian law and regulations.
Trading on global exchanges will be nearly impossible, unless carried out through a domestic intermediary or using foreign bank accounts.
Another recently introduced bill requires Russian residents to report their wallets hosted by foreign-based crypto platforms to the Federal Tax Service (FNS), as reported by Cryptopolitan.