In a recent move, the Russian tax authority have said that citizen’s crypto earnings could be subject to tax. Interestingly, the taxation on these earnings could be irrespective of the fact that tokens have no legal status in the country.
According to local media reports, the Federal Tax Service (FTS) stated that crypto earners could pay taxes using two different methodologies. Some count this as mixed signals from the government about its stance on cryptocurrencies.
In its briefing, the FTS said those making profits from cryptocurrencies could declare their earnings on personal income tax declarations or use the simplified taxation system (STS). Notably, currently, crypto has no legal status in Russia and historically the Russian central bank has against increasing the exposure to crypto.
While the central bank had previously proposed a ban on the crypto sector, government ministries, such as the ministries of finance, trade, and energy, have all expressed a desire to “legalize” and regulate crypto. This strife between the prime entities has led to a years long impasse between the bodies.
The Russian central bank has one of the biggest Russian critic of cryptocurrencies and doesn’t intend to entertain its promotion and nodded its approval for use of crypto in cross-border settlements due to sanctions.
In its apparent desperation, the finance ministry last week proposed a compromise that would effectively bar everyone in Russia except for miners from handling crypto. However, the FTS appears to have thrown another piece of information recently.
The tax authority stated that crypto can be recognized as a form of property and declared on tax returns accordingly. However, the stance of FTS is nothing new as Russian courts have previously ruled that crypto can be protected as a form of “intangible property,” and thus covered by existing property rights.
Further, the FTS explained that the status of cryptocurrencies is not fixed by law,” but “until this issue is resolved,” the sale of crypto assets could be “considered as the sale of property. Detailing on the process, the FTS stated that “income from the sale of cryptocurrency” can be calculated by using “the documented costs of its purchase.” The agency also stressed that tax calculations must be made in fiat Rubles.
In regards to this, the FTS has also asked crypto traders to “submit a declaration” using existing documents by April 30, 2024. Alternatively, using the STS, crypto traders can reportedly calculate their earnings by calculating the difference between their incomes for sales and the price they paid when “purchasing cryptocurrency.”
Notably, Russia is not the only nation to consider taxing the crypto assets. Previously, several other nations like the United States and even developing nations like India have either announced the tax regime or have proposed to do so. However, amid the fights between the Russian agencies regarding their stances, the plan to tax shed light on the openness towards acceptance.