Crypto News – Russia Approves Cryptocurrency Tax Framework

The Russian Government Commission on Legislative Activities advanced a bill on November 11 to tax cryptocurrency operations through corporate profit tax and personal income tax systems, Russian newspaper Izvestia reported. The rules follow Russia’s new mining regulations that started November 1.

The legislation, first drafted in 2020 but delayed until now, classifies crypto as property and sets tax requirements for individual and corporate miners. Companies need Federal Tax Service registration to mine legally, while individuals can mine without registration when using under 6,000 kilowatt-hours monthly – about six times the average Russian household consumption.

Tax And Mining Framework Details

The law establishes cryptocurrency as property, creating a split tax system: personal income tax for individuals and corporate profit tax for businesses. The framework extends to small businesses and self-employed individuals, while requiring miners to register with tax authorities.

Russia introduces a two-stage taxation model for mining operations. At Stage 1, companies pay initial tax when crypto arrives in their wallet, with the tax base calculated using major exchange closing prices on deposit date. Companies can choose the most appropriate price source among exchanges, while all foreign currency values convert to rubles at the Central Bank’s official rate.

During Stage 2, which occurs at cryptocurrency sale, additional tax applies if the sale price exceeds initial taxed value, while price drops qualify as deductible losses. To prevent tax avoidance, the law sets minimum taxable value at 80% of market price, meaning bitcoin price appreciation between mining and selling faces taxation.

Starting 2024, individual traders and miners will pay progressive tax ranging from 13% to 22% for annual incomes above 2.4 million rubles, while the corporate tax rate increases to 25% in 2025.

Companies can reduce their taxable base with documented operational costs, including electricity expenses, mining equipment purchases, maintenance, facility rentals and staff salaries. The tax base for mining operations remains separate from other business activities, requiring distinct accounting and reporting.

Tax authorities gained power to request bank statements for crypto-related accounts if they suspect violations, while regulators monitor crypto-to-fiat transactions through banks.

Compliance Requirements

Mining infrastructure operators must report all service provision data to the Federal Tax Service, with a 40,000 ruble ($417) fine for missed deadlines or failure to report. This new oversight extends beyond individual miners to include hosting providers and mining pools.

Notable exceptions exist in the framework – crypto operations won’t face value-added tax (VAT). The government rejected earlier proposals for electricity consumption-based taxation through special excise taxes on power used for mining.

According to the Industrial Mining Association estimates, these tax measures could generate annual budget revenues of 50 billion rubles ($521 million). However, industry representatives argue that taxable income should only be recognized at cryptocurrency sale rather than at mining, citing concerns about investment attractiveness according to Izvestia.

Bitcoin’s Global Economic Impact

Bitcoin’s decentralized nature continues to benefit nations worldwide. Bhutan, with just 800,000 citizens, generated $750 million through bitcoin mining using green energy. El Salvador aims to leverage bitcoin to address national debt, while the U.S. considers building a strategic bitcoin reserve.

The global race for bitcoin adoption intensifies. Russia’s new framework, while focused on revenue generation, represents just one aspect of cryptocurrency regulation. Deeper integration of bitcoin specifically – rather than other cryptocurrencies – into everyday economic life could yield significantly higher returns than tax revenue alone, comparable to the economic impact of Internet adoption.

No government can control, manipulate or weaponize bitcoin for political purposes – this fundamental feature makes it uniquely valuable in today’s geopolitical landscape for any country.

As the competition for bitcoin’s economic advantages grows, countries that take bolder steps toward its practical implementation may find themselves at the forefront of a transforming global financial system.