Russia’s Proposed Cryptocurrency Tax: Experts Weigh In

In Russia, work has resumed on a bill concerning the taxation of cryptocurrency transactions, four years after the first draft was presented. Lawyers interviewed by ForkLog are optimistic about gaining clarity on declaring this type of asset, while the crypto community doubts the effective implementation of the new regulations.

Legalize, But Not Harshly

Developing regulation for cryptocurrency transactions in Russia could solve many industry problems, believes Vladimir Sobinsky, a lawyer at DRC. He notes that currently, individuals and legal entities do not understand how to declare income from bitcoin transactions. 

“As specialized lawyers, we see a desire among market participants not to hide but to declare their income. Their main request is to act completely legally and pay all taxes. The state should aim to legalize this taxpayer aspiration,” the expert noted. 

However, he fears that imposing strict tax rates will lead citizens to conceal their actual income, which is “easy to do” in the cryptocurrency sphere due to technical features. 

“Implementing standard rates (20%) for legal entities cannot be considered attractive given the additional capital gains tax. Creating a favorable regulatory environment is crucial for fostering and implementing innovative technologies in the economy. And what could stimulate better than preferential taxation?” Sobinsky concluded.

Meanwhile, Eduard Davydov, senior partner at Emet law firm, considers a two-stage taxation system for miners to be rational. 

“In the first stage, mining income is considered property, and its value must be declared. In the second stage, upon selling cryptocurrency, capital gains are taxed—the difference between the sale price and the original asset cost,” the lawyer explained. 

He emphasized that this approach would be “fair” if taxpayers are allowed to deduct mining expenses. 

“It’s important for tax authorities to take a clear stance and communicate it to staff, ensuring a unified approach to expenses,” Davydov added.

How Has the First Draft of the Bill Changed?

The original document appeared among other cryptocurrency bills during 2020-2021, says Andrey Tugarin, founder of the legal company GMT Legal. It was then that Russia adopted the fundamental law “On Digital Financial Assets,” regulating cryptocurrency circulation.

At the same time, the Ministry of Finance approved a concept for comprehensive regulation of bitcoin exchanges and exchangers in Russia, and a new code 09 was introduced in tax declarations for income from digital currency transactions. 

“Strangely enough, the current bill is not about taxes. The issue of individual tax payments was resolved in 2021, so don’t expect anything new here. The main introduction of this document is two new reporting documents for individuals and legal entities,” Tugarin explains.

Namely:

• A notice of acquiring the right to dispose of digital currency, including through third parties;
• A report on digital currency transactions and balances.

An important point is that the Federal Tax Service determines the procedure for establishing the market price of cryptocurrencies. This will be particularly relevant given the tax authority’s new powers to maintain a registry of miners, Tugarin emphasized. 

According to him, comprehensive regulation of crypto exchanges and exchangers has not occurred since 2020, and this business in Russia remains “grey.” Meanwhile, regulations on mining and a law on an experimental legal regime allowing the use of cryptocurrencies for cross-border payments have been adopted. 

“It’s clear that this dormant bill had no application for almost five years. Today, it will certainly find its use among miners and experiment participants, as reporting mechanisms are definitely needed and will appear in some form,” the expert reflects. 

Tugarin suggested that the document could be adopted by the end of 2024, supplemented with a taxation format for miners. 

“Ordinary individuals are also affected. But until we have exchanges and exchangers that strictly comply with Russian legislation, actively monitoring them within the cryptocurrency framework will be extremely difficult and inconvenient for our regulators,” he concludes.

What About Figures and Law 115-FZ?

Exved CEO Sergey Mendeleev, after a brief review of the tax bill, doubted “the feasibility of its provisions.”

“I can hardly imagine who will register as a Russian miner and officially produce ‘Russian’ bitcoins, of which exactly zero have been mined in the past couple of years, according to official data,” he stated in a comment to ForkLog. 

In his view, introducing a tax on cryptocurrency trading profits for individuals should mean that banks will stop blocking accounts under Law 115-FZ.

“In this case, there are no problems—at the end of the year, individuals will provide certificates from exchanges about their transactions and pay the due personal income tax. However, I personally cannot imagine how to pay taxes on transactions through hundreds of drop accounts that cryptocurrency traders are forced to use for their work—there is no such option in the personal account of the tax service,” Mendeleev pointed out. 

The expert also expressed skepticism about the estimated tax revenues of 50 billion rubles per year and doubted the authorities’ “ability to use a calculator.”  

“The value of all bitcoins potentially mined annually using Russian power grids is about $2 billion, with costs estimated at 50% to 80% of this figure. I fundamentally do not understand how another 25% in taxes can be squeezed out of this,” he added. 

In conclusion, Mendeleev expressed his willingness to bet that the volume of taxes collected exclusively from mining activities in 2025 will not exceed 1% of the stated amount—no more than 500 million rubles. 

The law regulating the circulation of digital currency in Russia came into effect on November 1.

Earlier, ForkLog reported that the government approved a draft amendment on the taxation of cryptocurrency transactions. Legal entities are expected to pay profit tax, while individuals will pay personal income tax.