In the absence of dedicated regulation, Ukrainians are expected to pay the regular 19.5% income tax rate on their profits from crypto-related activities like trading and mining, a high-ranking official from the Finance Ministry in Kiev explained. Crypto investors are free to report their digital funds as either property or financial assets.
Cryptos? Tax Them Like Tanks
The question, what do crypto investors owe the state, is a hot topic in many communities around the world. Authorities in most countries rush to tap into their incomes and profits, often before they’ve regulated the space and legalized digital assets, and sometimes even when they refuse or fail to recognize cryptocurrencies in any of their roles. Ukraine is no exception.
However, according to Ukraine’s deputy-finance minister Sergey Verlanov, the issue with cryptocurrencies is clearly exaggerated as far as taxation is concerned. Everything is much simpler than it seems at first glance, he claimed in an interview with Ekonomicheskaya Pravda.
“Two types of operations are possible with cryptocurrency – mining and trading. So, let’s say we bought bitcoin for 1,000 hryvnias; then we were lucky and it went up to 2,000 hryvnias; then we left bitcoin and credited the funds to a bank card. The change is 1,000 hryvnias. We impose income tax on it,” he elaborated, adding: “The rate is 19.5% – whether this is a lot or a little, is a rhetorical question.”
Verlanov noted that while cryptocurrency has no legal status in the country, it is a common item, subject to turnover. “Under the Civil Code of Ukraine – this is an intangible property,” he said. To make his explanation clearer, the Finance Ministry official provided his “favorite comparison.” Trading bitcoins, Verlanov said, is like buying and selling tanks in World of Tanks, the popular online game.
Nevertheless, the deputy-finance minister believes Ukraine needs to determine the legal status of cryptocurrencies. Sergey Verlanov thinks that once that happens, crypto exchanges should act like tax agents. If the cryptocurrency is bought on an exchange, the law should oblige traders to declare their income and indicate its source.
Regulation to Provide the Ultimate Answer
The government representative also pointed out that currently Ukrainian taxpayers have two options when reporting their crypto incomes. “We already have deputies who have submitted electronic declarations and reported their crypto assets. Some declared them in the ‘property’ section, others in the ‘financial assets’ section. Both interpretations can be used since cryptocurrency does not have a legal status yet,” Verlanov noted. Without it, he warned however, it would be impossible to implement proper taxation and exert adequate control over cryptocurrency transactions.
In the absence of dedicated legislation, many aspects of crypto regulation remain unclear in Ukraine. Increasingly popular, cryptocurrencies are still unregulated despite the three bills filed in the Rada since last October. A fourth draft expected in September is dealing with cryptocurrency taxation. Its authors have proposed the introduction of a temporary tax regime in the sector until 2025, with 5% tax on profits from cryptocurrency trading and mining as well as tax exemptions for crypto-to-crypto transactions and purchases of goods and services with coins.
Last month the Financial Stability Council of Ukraine approved a regulatory concept for the crypto space. The body includes representatives of the National Bank of Ukraine (NBU), the Ministry of Finance, the Deposit Guarantee Fund, the National Securities and Stock Market Commission (NSSMC), and the National Financial Services Market Commission. In his interview, deputy-finance minister Sergey Verlanov said that two of these institutions are in the best position to take responsibility for the oversight of cryptocurrency activities – the NSSMC and the NBU, Ukraine’s central bank.
Do you think Ukrainian authorities will lower the tax rates for crypto incomes and profits? Share your expectations in the comments section below.
Images courtesy of Shutterstock, Official website of the President of Uzbekistan.
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Source : Bitcoin