Business 25 October 2018

Ed Drake

Draft bill seeks ‘tax holiday’ for crypto companies in Ukraine

A bill proposed by lawmakers in Ukraine could see the country’s fledgling cryptocurrency sector benefit from a “tax holiday,” as part of a package of measures designed to foster the development of the sector there.

Filed before the Verkhovna Rada, Ukraine’s parliament, the tax exemptions proposed by the bill would potentially benefit the sector until the end of 2029, in what would be a significant development for the country’s crypto entrepreneurs and related entities.

Lawmaker Yuri Derevyanko, of the Movement of New Forces party, has guided Bill 9083-1 through several parliamentary hurdles already, including passing committees responsible for budgetary police, EU integration, customs and financial industry policies.

If passed into law, the bill would change the country’s tax code, providing tax breaks on all income earned from cryptocurrency business, including gains from crypto transactions.

The measures would apply to private individuals as well as businesses, in addition to exempting the import and sale of mining equipment from applicable VAT.

The bill also goes on to define cryptocurrencies in Ukraine’s statute books for the first time, qualified as intangible digital assets with ownership recorded in a distributed ledger. Mining is described as a “data processing activity,” for which digital assets are paid as a reward.

Derevyanko said introducing a 0% tax rate for the crypto sector would be instrumental in its development within Ukraine. He told local media, “I think that it is necessary to introduce a 10-year tax moratorium in the crypto space. We must streamline and legalize this huge sector, which will be the engine of the new economy.”

The bill becomes the second before Ukraine’s parliament, following similar proposals from the president’s Solidarity party. Under these proposals, a tax rate of 5% would be introduced for the sector up to 2024, falling short of the measures proposed by Derevyanko.

For the most part, Ukraine’s crypto sector is currently unregulated, with previous bills seeking to establish regulations tied up in the parliamentary system, without notable progress being made.

If adopted, the latest proposals would be the most significant attempt to date to write cryptocurrency into domestic law, as well as establishing more favourable conditions for crypto businesses to set up in Ukraine.

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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