Tax amendments for cryptocurrency holders in Russia to be revised over arbitrary penalties

The bill’s text on taxation of cryptocurrency operations does not clarify which tax will apply to digital assets, and the proposed penalties are unfounded, according to the State Duma’s Legal Department.

Experts note that the document removes digital currency from value-added tax and from profits tax. As a result they recommended providing additional justification for recognising cryptocurrency as a taxable object.

The bill imposes fines on individuals and organisations that fail to report the right to dispose of cryptocurrency, its turnover, and the balance, if the amount of receipts or withdrawals over a year exceeds the equivalent of 600,000 roubles.

If a payer does not include cryptocurrency receipts in the tax base, the penalty will be 40% of the unpaid tax. For failure to provide a report on inflows or withdrawals of digital currency, a penalty of 10% of the larger of the amounts—withdrawals or the account balance—will be charged. If the information is submitted late, the fine will be 50,000 roubles.

“The explanatory note does not provide arguments for the sizes of the penalties. Arbitrary regulation of such relations is unacceptable. Moreover, the document provides different penalties for the same offence — failure to submit to the tax authority a report on cryptocurrency operations and on its balances,” the conclusion states.

The document gives taxpayers the right to report the ability to dispose of digital currency (including through third parties), and to file reports on transactions with it and on balances in their accounts.

“However, according to the essence of the bill, the above is not a right but an obligation of the taxpayer,” the experts noted.

The tax service is empowered to request bank statements for individuals’ accounts used for cryptocurrency transactions in cases of suspicions of violations of the law. However the bill does not provide clarifications on the procedure by which the supervisory body may establish signs of such violations.

The document also does not address taxation of digital financial assets.

Conclusion of the Legal Department by ForkLog on Scribd

Remarks were sent to the State Duma Committee on Budget and Taxes.

In December 2020, the government-approved bill on cryptocurrency taxation was introduced to the State Duma in early December 2020.

Experts conducted a review of the bill specially for ForkLog.

When to report on bitcoins: a look at the bill on taxing cryptocurrencies

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