At the beginning of August, news broke that the government of Ukraine wanted to place a tax on all cryptocurrency activity. Crypto mining activity and sales that come from selling digital currency would be assessed a 5% tax on top of the current 1.5% tax that all Ukrainians pay. Now, it would seem that lawmakers have a different scheme in mind, and could see even higher taxes paid by some in the country.
In a draft law published on the government’s website a few days ago, the 5% tax would still be assessed to legal entities and individuals for their crypto assets. However, the law, which was backed by 23 government officials, would introduce another 18% tax on crypto-related profits by businesses.
The tax law wouldn’t go into effect until January 1, 2024. The tax rate is the same rate for personal and corporate income tax in the country. The law was introduced to remove a significant number of operations from the current gray market in order to increase the revenues of the different Ukrainian states. Lawmakers expect the change to add at least $43 million to the country’s revenue.
According to the law’s supporting documentation, “The uncertainty of the legal status of virtual assets in terms of taxation, tax consequences, and transactions with them leads to the fact that natural and legal persons with virtual assets (cryptographic and other tokens) are effectively deprived of an effective way of protecting their ownership of such virtual assets…”
It further explained, “Given the current state of affairs, Ukrainians are deprived of the opportunity to raise funds and resources to develop their ideas and technologies through traditional instruments. So, last year, Ukrainian companies did not get a single dollar through an [ICO (initial coin offering)]. At the same time, according to the Ukrainian association UVCA and Deloitte in 2017, 19 Ukrainian start-ups attracted $160 million … through the ICO (the primary token proposal). The development of the ICO mechanism as a component of the virtual assets market requires the Ukrainian parliament to establish clear rules.”
Cryptocurrencies are currently not regulated in Ukraine, although it has been trying to adopt policies. The country’s Financial Stability Board met in September 2017 to try to define the legal status of cryptocurrencies, and this past May, Timur Khromaev, who heads the National Securities and Stock Market Commissions in the country, announced that the commission would begin recognizing crypto as a legitimate financial instrument in an effort to push for its legal recognition. This move was later supported by the country’s Financial Stability Council in July.
Cryptocurrency mining remains a hot topic. This past June, Ukraine’s State Service for Special Communication and Information Protection announced that it doesn’t have plans to regulate mining operations, given the uncertainty and unpredictability of the crypto markets, as well as possible regulatory reaction.
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