How is the taxation of Bitcoin transactions in a country where a transparent regulation of the cryptocurrency market has not yet appeared?
Recently, the State Duma adopted in first reading three bills relating to cryptocurrency. However, issues of taxation remained outside the parliamentary agenda. And today it is not clear to many how to calculate the income from cryptocurrency, from what moment and how to pay the tax.
The thorny path
One of the first topics of cryptocurrencies back in 2016 was touched upon by the Federal Tax Service. To the credit of the fiscal people, it is worth noting that in their letter they voiced the main thesis - transactions with cryptocurrencies do not contradict the laws of Russia. However, there were no detailed instructions on how to pay taxes.
By the end of 2017, the Ministry of Finance seized the initiative, releasing its first clarification on the topic of cryptocurrencies, but it also did not add clarity. The ministry only explained that in the absence of special legislation, bitcoins are subject to general provisions on the payment of personal income tax.
Meanwhile, conscientious crypto-enthusiasts were already eager to fulfill their constitutional obligation to pay taxes, but not always a warm welcome awaited them within the walls of tax inspections. The case of a resident of Rostov, who announced to the inspectors of his desire to declare a crypt from the threshold, is indicative. The tax authorities not only refused to accept the declaration, but also informed the Investigative Committee about the visit of a person performing operations with money surrogates.
Although some are more fortunate. For example, Andrei Voronkov, a businessman from Moscow, considers himself the “first cryptographic payer”, with whose participation the SOMN project collected $ 42 million during the ICO (funding a startup by issuing its own cryptocurrency).
“The task of the crypto community is to make our state as interested as possible in creating a favorable climate for the cryptoindustry. Voluntary legalization of income from cryptocurrency through the payment of taxes is an important demonstrative step in this direction. Therefore, I was the first in Russia who decided to pay Bitcoin taxes, ”says Voronkov.
For this purpose, the businessman hired costly auditors to "do everything according to the law" and submit the declaration. “Although the period of verification of documents has not yet expired, I have not received any additional questions from the tax side,” says Voronkov.
But Voronkov may not have been a pioneer. According to the June press release of the Federal Tax Service of Russia, the palm should be given to a conscientious citizen from the Altai Republic, who reported for the proceeds from the sale of cryptocurrencies during a recent declaration campaign. Unfortunately, it is not possible to either confirm or deny this information, since it bears the stamp of tax secrecy.
Bitcoin as a property
The situation with tax accrual was also incomprehensible due to the fact that for a long time various officials persistently called the cryptocurrency “other property”. However, quite recently, the head of the State Duma Committee on the Financial Market, Anatoly Aksakov, finally admitted that “digital assets will be recorded not as property, but as a new type of digital property rights”.
And the Tax Code fundamentally differently looks at the taxation of “property” and “property rights”, separating them on opposite sides of the barricades. Privileges and preferences on “property” are not at all applicable to “property rights”. For example, an income tax exemption “if you own more than 3 years” will not be applied, which would allow the owners of the “first” bitcoins not to calculate the tax.
So, analyzing the essence of cryptocurrency and the latest observations of the authorities, we can conclude that the cryptocurrency tax must be paid to everyone - both citizens and legal entities.
For the profit tax of organizations, the Ministry of Finance in February of this year made an unequivocal conclusion: income is recognized upon the sale of cryptocurrency, regardless of receipt of funds (assets) for it. That is, the legal entity must pay in any case, even if the cryptocurrency received by it was not withdrawn to Fiat.
As for natural persons, despite the vagueness of the wording of the head of the 23 Tax Code on the income tax of citizens, for the purposes of personal income tax to pay tax until the conversion of cryptocurrency into fiat in most cases is still required. And after the conversion - all the more.
How to calculate
With the calculations, everything is actually quite simple. In May-June of this year, the tax authorities and the Ministry of Finance issued letters in unison in which they tried to explain to citizens the procedure for paying income tax on cryptocurrency.
Officials believe that the tax base for cryptocurrency purchase and sale transactions should be determined in rubles as an excess of the total amount of income received from the sale of cryptocurrency over the total amount of documented expenses for its acquisition.
Despite some formal inconsistencies, this approach should be recognized as conceptually correct. This rule is worth while to stick to the owners of cryptocurrency, since the deputies do not promise special amendments to tax legislation in the coming years.
To date, the Russian tax authorities simply do not have a really working mechanism for identifying and linking the crypto wallet to a specific person. The situation may get off the ground, when automatic international exchange of tax information will be fully operational.
Because of this, in the future, risks may increase for those Russians who have been verified on foreign cryptocurrency exchanges. But so far there is no task to catch the owners of cryptocurrencies who do not pay taxes, a federal official said in an interview with the Vedomosti newspaper.
In the meantime, there are no insurmountable obstacles to crypt taxpayers knowing that the crypt is being declared. The inspectorate may refuse to accept the declaration only in a very limited list of cases, and the declaration of income from cryptocurrency is clearly not applicable to them. There is no need to fear the tightening of tax control measures, since tax audits of “self-declared” individuals in Russia are a rare exception rather than the rule.
So all happy owners of cryptocurrency can voluntarily pay taxes and sleep well.