Ukraine proposes alternative tax on Bitcoin transactions

On 17 November, Ukraine’s Ministry of Digital Transformation registered an alternative bill on taxing cryptocurrency transactions.

According to the ministry’s proposal, the tax for individuals in the first three years after the law comes into force should be 5%, the next five years — 9%, after eight years — 18%.

Legal entities are exempt from VAT except for operations with tokenized assets. Service provider operations related to virtual assets are exempt from VAT except for advisory services.

Residents of Diia.City may choose between an 18% tax on profits or a 9% tax on withdrawn capital.

Authorization of service providers is a one-off process and does not require annual payments. Mining for both legal entities and individuals is fully exempt from this requirement.

Additionally, the Ministry proposes creating an innovation zone where one can operate for three years without prior registration.

Moreover, the bill defines the legal status of virtual assets and aligns them with the standards of FATF and MiCA.

According to statements by Digital Transformation Minister Mykhailo Fedorov, the rates proposed by his ministry will create favourable conditions for the development of the crypto industry and boost budget revenues.

Earlier, analysts at Ukraine Economic Outlook calculated that, due to the lack of regulation of the cryptocurrency market, Ukraine lost more than $4 billion in tax revenues from 2016 to 2022. A further $48.8 billion in direct income for households and businesses was lost.

Earlier, on 7 November, to the Verkhovna Rada of Ukraine was submitted a bill drafted by the НКЦБФР regulating taxation of cryptocurrency operations in the country. It proposed a rate of 18%, which drew condemnation from civil society.

Together with it, an updated version of the law “On Virtual Assets” incorporating the MiCA provisions, as well as accompanying projects to amend various regulatory acts, were sent to Parliament leadership for consideration.