Russia Approves New Tax Regime For Crypto Mining And Trading

On November 11, the Russian Government Commission on Legislative Activities advanced a bill to tax various cryptocurrency operations through corporate profit tax and personal income tax systems. The bill defines crypto assets as property and follows the country’s new mining regulations by establishing different tax requirements for individual and corporate miners. 

Russia Introduces New Crypto Tax Framework That Recognizes The Asset Class As Personal Property

The legislation, first drafted in 2020 but delayed until now, requires mining firms to register with the Federal Tax Service before commencing operations within the Russian Federation. Meanwhile, individual crypto miners can mine without registration if their operations use under 6,000 kilowatt-hours of energy each month, which is about six times the average that a Russian household consumes.   

The framework adopts a two-stage taxation model: personal income tax for individuals and corporate profit tax for businesses. In the first stage, crypto users are taxed when they receive cryptocurrencies, with the tax rate calculated based on the closing price of the particular asset on major trading platforms. 

The second stage takes effect upon selling crypto tokens, with additional taxes applied if the sale price exceeds the initial taxable value. Bear in mind that token price drops qualify as deductible losses. Starting today, individual traders and miners with an annual income exceeding 2.4 million rubles ($24,194) will be taxed at a progressive rate of between 13% and 22%, while for corporations, this rate will increase to 25% from 2025 onwards. 

Mining companies can choose the most appropriate price for their Bitcoins from exchanges, however, all foreign currency values will be converted into rubbles at the official rate designated by the Bank of Russia (CBR). To prevent tax avoidance, the legislation sets the minimum taxable value of a cryptocurrency at 80% of its market price, which means Bitcoin’s price appreciation between the time it was mined and sold on exchanges will face taxation. 

Mining firms can reduce their taxable base with documented operational costs, like electricity expenses, mining equipment purchases, maintenance, facility rentals, and staff salaries. However, the tax laws for Bitcoin mining companies remain separate from other businesses because they require distinct accounting and reporting.

Russian tax authorities will request crypto-related financial statements from miners and traders if any violation is suspected, while the crypto-to-fiat transactions are monitored through banks. 

How To Comply With The Russian Crypto Mining And Trading Tax Law?

To comply with the new crypto regulation, Bitcoin mining infrastructure operators must report all service provision data to tax authorities. Those who miss the deadline or fail to report their activities will be fined 40,000 rubles ($417). The oversight extends beyond individual miners to include hosting providers and mining pools. 

However, exemptions do exist within the framework, such as crypto operations not being charged value-added tax (VAT). the Russian government had earlier rejected proposals to tax miners based on their electricity consumption through special excise taxes on the power used for mining. 

According to estimations from the Industrial Mining Association, these tax measures could generate annual revenue for the budget in the range of 50 billion rubles, approximately $521 million. 

However, the tax regime has received some backlash from market participants, who argue that taxable income should only be recognized at the point of sale rather than at mining. They cited concerns about investment attractiveness. 

Bitcoin Mining Sector Is Gaining Traction Across The World 

The Bitcoin mining industry continues to benefit nations worldwide. Recently, Bhutan, a tiny Asian country with just 800,000 residents, generated $750 million mining BTC using green energy. 

El Salvador, which adopted BTC as a legal tender in late 2021, aims to leverage the flagship cryptocurrency to address its national debt. In the United States, the incoming Trump administration is exploring a similar strategy to establish a strategic Bitcoin reserve to hold the crypto asset as a treasury asset. 

At the time of writing, Bitcoin (BTC) is trading at 91,044 – up 4.01% in the last 24 hours. 

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