Amendments that regulate the tax laws of Russia in order to introduce taxation rules applicable to transactions involving crypto assets have been approved by the Parliament. The legislation is applicable to business operations that deal in tokens and cryptocurrencies. Some of the new rules will allow Russian firms to enjoy a lower tax burden, as opposed to their foreign counterparts.
State Duma amends tax laws
The lower house of Russia’s parliament called the State Duma recently approved legislation aimed at amending the Tax Code in the country in its second, third and last reading. This will enable authorities in Moscow to charge taxes on transactions involving the use of digital financial assets (DFAs).
The bill provides clarity regarding the different tax rules that will be applicable to cryptocurrencies, as Russia is currently using the term DFA to refer to them. The definitions and legal framework that is applicable to cryptocurrencies will be expanded in the Russian Federation this fall when a new law called ‘On Digital Currency’ comes into effect.
Exemptions and calculations
The value-added tax (VAT) will not be applicable to platforms that control, issue, or maintain records of digital financial assets (DFAs) in the same way as securities. The legal term that refers to both utility and security tokens is digital rights and when exercising these, the difference between the acquisition and sale price will be used for determining the tax base.
According to the new tax law, 13% tax will be applicable to legal entities in Russia that own digital tokens. This will be charged on the income they generate from these assets. Meanwhile, a higher tax rate of 15% will be charged on the same from entities that are not based in Russia. This would give local businesses a slight advantage over their foreign competitors.
The law’s approval
Initially, the crypto tax law had been brought up in the Russian parliament’s lower house back in mid-April and in the next month, it was able to pass its first reading. The new legislation and financial market committees of the parliament also gave their approval for the tax law. At that time, it was highlighted that the amendments that were suggested in the Tax Code of the country did not take into account private crypto holdings.
This year, there has been more activity amongst Russian officials and lawmakers when it comes to regulating the crypto industry in the country comprehensively. Back in February, the Russian Ministry of Finance proposed a digital currency law called ‘On Digital Currency’. However, this law has not received its approval as yet because discussions are still ongoing about what legal status will be granted to decentralized cryptocurrencies, such as bitcoin.
The Central Bank of Russia (CBR) had been intent on imposing a ban on cryptocurrencies, as it considered them a threat to the financial stability of the country. But, recently, it has changed its stance a bit because cryptocurrencies are proving to be useful in helping Russia evade the sanctions that have been imposed by the West.