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Russia's Federal Tax Service (FNS) has proposed a new taxation framework targeting cryptocurrency miners, specifically focusing on unrealized gains. According to a report from the Russian newspaper Vedomosti, the FNS aims to implement a “two-stage” tax system requiring miners to pay taxes on mined coins, even if they have not sold them.
During a recent meeting of the newly formed Industrial Mining Association, Alexey Katyayev, head of the Interregional Inspectorate for the FNS’ “Largest Taxpayers” group, outlined the details of this plan. Although he emphasized the intent to establish a “classical system” of taxation for miners, he also noted that no final decision has been reached regarding implementing these measures.
Katyayev explained that the first stage of the proposed tax system would mandate miners to make advance tax payments based on the cryptocurrency they have mined. This tax becomes payable when miners receive the coins in their wallets. According to the FNS, it is a taxable event when a miner obtains the right to control their crypto assets, including if they stay in a mining pool or transfer to their address.
The second stage of this tax system will occur when miners transfer the coins to other accounts of their company’s wallets or exchange the cryptocurrency. If the current value is higher than the value it had when the initial taxes were paid, the miners will be charged taxes on the profits. Miners can also use this to lose their taxed income if the reported value of a cryptocurrency goes down.
Katyayev also spoke about the regulation of Value Added Tax (VAT) for the operations of the mining of cryptocurrencies. He further stated that cryptocurrencies that result from mining will not be subjected to VAT since mined assets do not possess specific monetary value according to the legal systems of Russia. The use and trade of cryptos at the moment is legal only in sandboxes, with the primary purpose of operating for international trading companies.
The FNS official expanded on the taxation challenges experienced by companies employing crypto mining alongside conventional enterprises. For instance, if a company deals in cast iron frying pans and also in crypto mining, it cannot set off the losses it incurs in mining against the revenue it generates from its frying pans and vice versa. This regulation is, therefore, designed to draw a clear line between different business activities so that each carries out its operations as determined by law.
The FNS urges home-based individual miners to pay part of their income via personal income tax, and it also compiles a single register on ML miners to enhance transparency and security.
Further, according to industry specialists these changes will augment competition and enable large players to get involved with public markets. The Russian crypto miners are expected to pay taxes amounting to $616 million on an annual basis.
