Business 10 August 2018

Gerald Fenech

Bill seeks to tax Ukraine residents 5% on crypto profits

Although the cryptocurrency market is in a disastrous state at the moment with most currencies at historic lows, the Ukranian government still sees it fit to impose a 5% tax on all cryptocurrency profits from mining or sales when these are exchanged to fiat. This is in addition to a mandatory 1.5% tax rate, which Ukranians owe the country since the beginning of a conflict in the East. The tax rate applies to both businesses and individuals who make trades, be it retail or institutional investors.

Although cryptocurrencies are apparently quite popular, they are still not legalized, much less regulated in the Ukraine. The crypto sector is, however, growing fast in the country and the relevant authorities are now expected to begin regulation of the sector in earnest. Russia is in a similar hiatus with three bills stuck in the Duma since October, and a fourth one expected to be filed in September. Undoubtedly, the lukewarm response is due to the complete crash of all cryptocurrency prices in the past months that have left prices practically where they were before the crypto bullrun began in October 2017.

With Ukraine getting closer to adopting crypto-related regulations after the approval of a regulatory concept in July, a new draft law seeks to address the aspects of crypto taxation. A group of deputies led by Ukrainian lawmaker Oleksiy Mushak and two dozen representatives of the domestic crypto sector are working on the bill, which proposes а temporary tax regime in the sector. The authors want it to be enforced in 2019 and remain in place until 2025.

If approved, the bill will introduce a 5% tax rate on profits from cryptocurrency trading and mining, according to Liga Business. Under the proposal, crypto-to-crypto transactions will not be levied—only crypto funds that are exchanged to fiat or used as payment for goods and services, including property. The tax will computed based on the difference between the digital assets’ buying and selling price or the difference between the crypto mining income and mining operation expenses.

Artiom Afyan, managing partner at Juscutum law firm, was quoted by the news outlet saying: “The state shouldn’t touch the exchange between cryptos but the exit to fiat, the real sector, and the purchases of goods. 5% sounds optimal. In fact – this is the price to pay for the legalization of income from dealings in crypto.”

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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