In Russia, income from crypto investments and cryptocurrency sales must be declared if a profit was made at the end of the year. However, few people do this.
What exactly should be taxed
It is necessary to report to the tax authorities about the profit when cryptocurrency is sold for rubles and other fiat currency. Declare income from mining at the moment of receiving coins on the wallet.
The tax is paid not on the entire amount of the sale, but on the difference between the income from the sale and the documented expenses for obtaining the asset. Cryptocurrency lawyer Denis Mayasov describes typical situations:
• Bought crypto for rubles - there is no tax (this is the formation of expenses/cost).
• Sold crypto for rubles - tax on the final result (income minus documented expenses).
• Received crypto from mining - income occurs on the date when the right to dispose of coins appeared, at the market quotation.
• Exchanged BTC for USDT / ETH for BTC — that is, one asset was used to purchase another; the tax is calculated based on the "sold/given" asset.
The sale of one cryptocurrency for another, or an exchange, should not be subject to taxation, according to Ignat Likhunov from Cartesius.
"However, due to the lack of official clarification, this transaction may carry tax risks, as there is a procedure for declaring the acquired assets," explains the Bits.media expert.
Denis Mayasov lists the following documents that can be used to confirm transactions and that should be submitted to the tax authorities in case of property disputes:
• Sales contracts/invoices/acts (if available);
• Exchange/wallet statements (transaction history);
• Bank statements for deposits/withdrawals;
• Calculation of the tax base (table: date, asset, quantity, price, income, expense, total).
• When to pay the tax
• The declaration for the previous year in the form of 3-NDFL must be submitted by April 30 of this year (online), and the tax must be paid by July 15.
• For the income from the sale, a special scale is applied: 13% from the amount up to 2.4 million rubles per year and 15% from the excess. Income from mining is subject to a progressive scale, from 13% to 22%.
• If you do not declare income and do not pay tax, you can receive a fine of 40% of the amount of unpaid tax due, warns Andrey Tugarin, founder of GMT Legal law firm.
• "I earned money in cryptocurrency, sold it, received a ruble, declared income, paid 13-15%. It is possible to reduce the tax base by proving the costs incurred to purchase cryptocurrencies," the lawyer adds.
• The Crypto Declaration Dispute
• This year, the Constitutional Court of Russia was forced to provide clarifications on whether a cryptocurrency owner has the right to treat their cryptocurrency as property if they have not declared it to the tax authorities. The Constitutional Court ruled that they do have the right, as cryptocurrency is considered property, and the right to own and protect property is enshrined in the Constitution.
• However, the constitutional judges left a note in the margins of their decision, stating that Russian lawmakers should amend the current regulations. Among the readers of Bits.media, there was even a question: what if this means that the authorities want to force all cryptocurrency holders, not just miners, to declare their digital assets?
• Lawyer Denis Mayasov clarifies: it is important to distinguish between declaring income and "declaring ownership." With declaring income, it is clear: if you sell cryptocurrency with a profit, you must declare the profit and pay taxes. However, the Constitutional Court has intervened in a situation where miners and "cryptocurrency infrastructure operators" are required by law to notify the tax authorities about the cryptocurrency in their wallets, but not individuals.
What will change for cryptocurrency holders
What can change when lawmakers follow the advice of the Constitutional Court and close the gap? Denis Mayasov believes that any cryptocurrency holders will then:
• have a duty to report the fact of ownership/operations;
• have to comply with the requirements for proving the origin of assets;
• face consequences for not providing information (fines/restrictions).
The crypto lawyer believes that if the legislators want to, people who regularly buy and sell cryptocurrency will be at risk of having their activities reclassified as entrepreneurial. Yes, "single transactions" do not equal business, but systematic and homogeneous activities are at risk.
"The consequences of 'if it is recognized as a business' are no longer about 3-NDFL 'as a physical person,' but about the regime of conducting activities, accounting, and possible tax and compliance claims," explains the Bits.media expert.
Lawyer Ignat Likhunov believes that the tax for traders may even be increased from 13-15% to 25%, which is the current full-fledged corporate income tax rate.
However, Andrey Tugarin, the founder of GMT Legal, is confident that no one intends to equate crypto investors with legal entities, and it will simply be a way to inform the authorities about their digital assets.
Miners (individuals, sole proprietors, and legal entities) are currently reporting their crypto wallets and mined cryptocurrency through their tax account. This straightforward method may also be offered to crypto traders and cryptocurrency owners.
It is likely that it will become more difficult to evade tax authorities. Exchanges, brokers, or exchanges will be able to report the ownership of cryptocurrency to the authorities, according to Tugarin. Starting this year, they will be required to obtain a license in the Russian Federation, as noted by the Bits.media expert.