Russian Taxman Is Coming after Cryptocurrency Profits

The Russian parliament has initially passed a new bill that will start taxing profits from Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term, according to local media reports. However, it is not clear if the taxation will apply to mining operations and income from crypto-based fund raising campaigns.

At the very core, Russian lawmakers still deem crypto assets to be property rather than currency for income tax purposes, which is the same as its regulatory guidance that came out years ago. That means the authority will continue to tax crypto profits and losses, like those for stocks, at capital gains rates.

The new bill establishes specific thresholds to trigger reporting Obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term. Specially, all domestic residents, including citizens and foreigners, will be required to report their crypto holdings to the tax authority if the total transaction amount exceeds RUB 600,000 ( roughly $8,100) in a calendar year.

The move highlights how regulators around the world are not only concerned with combating cryptocurrency related crimes but also chasing those who use the virtual asset to hide their wealth or avoid paying taxes. This is nothing new, but it is a bit complicated as a booming market over the last few months made some crypto dealer millionaires virtually overnight.

Under the current laws, crypto exchanges and other businesses serving as middlemen can provide the data on their clients voluntarily, but after the new instructions, they will not be able to refuse or appeal the authorities’ requests to turn over information.

The recent move comes barely a few months after Russia’s bill to regulate cryptocurrencies. It was signed by President Vladimir Putin. The new law provides the regulatory framework of digital financial asset (DFA) transactions and gives legal status to cryptocurrency though it prohibits its use as a means of payment.

Moreover, the Russian government asked public officials who own or trade cryptocurrencies to disclose their holdings. Through the new guidance signed by Vladimir Putin, cryptocurrency is an investment asset, and, like other property held for investment, it may create a conflict of interest for employees who own it.

Failing to disclose data or deliberately providing false information is a criminal offence. Penalties for unreported crypto transactions include a jail term of up to three years and a fine ranging from 500,000 rubles to 2 million rubles, the finance ministry proposed.