New crypto haven or US competitor: Russia approves crypto taxation

The Russian government has approved a bill regulating the taxation of crypto transactions. What will now change in the country’s tax base?

The Russian government has passed a bill regulating cryptocurrency taxation. Prepared by the Ministry of Finance, the bill gives crypto property status, as local media reports. This means companies must pay income tax on crypto transactions, while individuals will be subject to personal income tax.

The rate for Russian citizens will vary from next year depending on their income — from 13% to 22%. Crypto transactions will not be subject to value-added tax though. Citizens and legal entities must report crypto transactions to the Federal Tax Service if receipts and write-offs exceed 600,000 rubles per year (about $6,000 as of press time).

Crypto mining infrastructure operators will be required to transfer data on the services rendered to the tax service. If the information is not received within the specified period, the site will face a fine of 40,000 rubles (about $400). It is noteworthy that the bill was prepared back in December 2020, but back then its consideration stalled. The adoption of the provision appeared after crypto mining was legalized in Russia on Nov. 1, 2024. After registering in a special register of the tax service, companies and individual entrepreneurs can mine crypto (e.g. Bitcoin).

How will the tax on profits from crypto be paid?

The tax on mining profits will involve two steps. First, miners will make an advance payment when receiving cryptocurrency in their wallets. Then, an additional tax will apply when the digital assets are sold. If the value of the mined coins increases after the initial payment, miners will owe more tax. Conversely, if the value drops, overpayments can be recorded as losses.

According to the latest proposal from the Russian Ministry of Finance, the tax rate for the sale of cryptocurrencies may be 13% starting in 2025 and 15% if the citizen’s income exceeds 2.4 million rubles (about $24,000) annually. As Russian state-controlled media Interfax reports, digital currency is recognized as property for the purposes of the Tax Code.

The same principle was included in the bill during its first reading, which took place more than three years ago. Income from transactions with digital currency will be included in the general tax base along with revenue from the sale of shares, bonds, investment units, repo transactions with securities, and income from transactions with securities in individual investment accounts and deposits in Russian banks. This will come into force in 2025.

If an individual’s total annual income from all these sources does not exceed 2.4 million rubles, then the personal income tax will be 13%. If this amount is exceeded, the tax will be 15% of the amount exceeding 2.4 million rubles, plus a fixed amount of 312,000 rubles (about $3,100), corresponding to 13% of 2.4 million rubles. In addition, the ministry will determine the amount of tax as follows: the tax base will be determined based on the market price of the digital currency at the time of receiving income.

Foreign trading organizations will set the market price (closing price) based on transactions concluded during the day. Foreign trading organizations are those whose digital currency trading volume exceeds 100 billion rubles ($1 billion) per day.

If transactions for the same cryptocurrency were carried out on two or more foreign crypto exchanges, the taxpayer can independently choose the market price. In this case, the proceeds from the sale of cryptocurrency will be calculated based on the actual selling price, but not lower than the market price reduced by 20%.

Russia follows North America’s path

The media noted that the mechanism for paying taxes on cryptocurrency is formed according to the North American approach.

As Oleg Ogienko, deputy director general for communications at BitRiver, explained, the miner’s profit tax is levied upon receipt of crypto in a wallet minus reasonable and documented expenses. Miners may also reclaim part of the tax paid if their expenses are proven necessary.

“As far as can be seen, the proposed mechanism is formed according to the North American approach. That is. First, the miner’s profit tax is levied upon receipt of cryptocurrency in his wallet, minus reasonable and documented expenses. Then, the miner’s capital gains tax is levied when the cryptocurrency is disposed of from its original wallet.”

Oleg Ogienko

Unlike Russia, U.S. taxation varies based on how long the cryptocurrency is held. Short-term holdings are taxed at rates between 10% and 37%, depending on income. Long-term holders enjoy lower rates of 0%, 15%, or 20%.