The opinions of mining market participants regarding the tax rates proposed in the State Duma for their activities were divided. Some called personal income tax at a rate of 15% and income tax at the level of 6% adequate, others considered that the rates should be unified.
According to Artem Shtanov, product director at EMCD, any competent regulation and taxation will benefit both the state and the industry.
“Now market participants need only transparent rules of the game for further development. Figuratively speaking, the miner wants to know how to continue his activities and not break the law,” the expert said.
Shtanov stressed that the above numbers can only be spoken about in the abstract, since they are not legally fixed. Nevertheless, he called favorable tax conditions for mining companies, since the current income tax rate in the Russian Federation is 20%.
Roman Nekrasov, co-founder of the ENCRY Foundation, believes that the difference between taxes for industrial miners and individuals is fundamentally wrong. However, the main thing, according to him, will be the discussion of the mechanism for calculating the taxable base:
“It is not yet clear how the costs incurred by miners in the production of cryptocurrencies will be taken into account, and what documents will help prove these expenses.”
For example, Nekrasov said that in order to import ASIC miners from China, the owner of the equipment will have to pay for logistics and customs clearance. It also bears the costs of buying or renting premises for the farm, installing an air cooling system, paying for service and electricity. At the same time, the miner is not obliged to sell the mined bitcoins in the same year.
“Will the miner be able to reduce the taxable base by the expenses that he once incurred for the organization of the farm, or only by the expenses that he incurred in the same tax period when the sale of coins was carried out? Or do Russian legislators think that mining is money out of thin air and miners’ income is so fantastically huge that it’s not worth reducing the tax base for expenses at all? asked Nekrasov.
Due to the lack of tools for Rosfinmonitoring to track the withdrawal of bitcoins mined in the Russian Federation, it is still an act of goodwill for miners to come out of the shadows, he added. The expert suggested that the authorities focus on finding favorable conditions and preferential regimes for miners, and not on prohibitive methods.
In turn, Roman Zabuga, partner of the international operator of data centers for cryptocurrency mining BWC UG, is convinced that Rosfinmonitoring will have no difficulty setting up the infrastructure to track the withdrawal of bitcoins owned by miners.
“I saw their terms of reference for the development of monitoring. They took into account all the details,” he said.
Zabuga called the proposed tax rates adequate. According to him, the calculation of profit should be carried out from the moment of the transition of cryptocurrencies to fiat.
“If the crypto is cashed out through third, fourth parties, the miners will not be liable for this tax liability. But in the end, all the crypto that the miner receives is converted into fiat. This is especially true for the Russian Federation, because there is nowhere to spend cryptocurrencies in the country,” he explained.
Since January 1, 2021, the law “On Digital Financial Assets” has been in force in the Russian Federation. It recognizes cryptocurrencies as property and prohibits using them to pay for goods and services in the country.
Regarding the potential outflow of cryptocurrency from the Russian Federation, Zabuga said that miners would still have to pay the tax – “if not in Russia, then in another jurisdiction.”
Andrey Loboda, PR director of data center operator BitRiver, described the current approach of the Russian authorities as “balanced and reasonable.” To minimize the difficulties of tax administration, he recommended that regulators establish closer interaction with industry entities.
The head of Comino, Evgeny Vlasov, believes that it is impossible to set up the infrastructure to track the withdrawal of bitcoins.
“The only thing you can take taxes from is bank accounts, as they are transparent to the tax authorities. Until the money is there, no one can track the assets in cryptocurrencies. Now many are paying with cryptocurrency just in order to avoid problems with the tax,” the expert said.
In his opinion, only a unified tax rate, as well as transparent and convenient working conditions, can bring mining out of the shadows. He added that in the case of the cryptocurrency market, the state has a very limited toolkit of influence.
“Miners can stay in the shadows or go abroad. This segment of the business cannot be forced, it can only be negotiated with,” Vlasov emphasized.
Bitfury Group CEO Vadim Krutov is convinced that Russia has unique prerequisites for the development of the mining sector. However, the existing regulatory uncertainty is forcing Russian investors to invest in foreign projects, creating jobs and increasing the GDP of other countries.
The proposed tax rates, he said, do not look high compared to other jurisdictions. For comparison, in the US and Canada, depending on the state and various benefits, corporate income tax is 21-38%.
“The annual investment in the mining sector in the US is measured in billions of dollars. The level of country risks in the Russian Federation is considered to be higher, therefore it is quite reasonable to offer more attractive taxation conditions – this way big capital will have enough incentives to choose Russia,” Krutov said.
One of the problems that the regulator has to solve is the problem of “landing” income in the Russian Federation. The expert notes that at the moment, transactions are often structured using foreign jurisdictions, in which most of the profits are shown, while the taxable base in the Russian Federation remains minimal. The Kazakh regulator, for example, tends to lump-sum mechanism industry taxation.
“In the US, where tax-risk options for structuring operations are severely punished, and the judiciary is considered objective and impartial, miners prefer to show income in full. Accordingly, for the US tax authorities, the problem of identifying the taxable base is less acute. Russia will have to analyze foreign experience, perform a comprehensive analysis of the situation and choose the best mechanism,” commented a top manager of Bitfury Group.
Recall that the desire of the Central Bank of the Russian Federation to completely ban mining in the country did not find the support of experts. They called all the arguments of the regulator untenable.
At the moment, the consolidated position of the authorities is that mining should become the subject of regulation. The corresponding scenarios the Russian government will prepare by 11 February.
According to the proposal of the head of the State Duma Committee on Industry Vladimir Gutenev, personal income tax when converting cryptocurrencies to fiat cannot be less than 15%, and the minimum income tax rate for mining companies and individual entrepreneurs should be at least 6%.
According to analysts, even with a simplified taxation system, the amount of taxes collected from the Russian crypto market can be up to 1 trillion rubles a year.
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The opinions of mining market participants regarding the tax rates proposed in the State Duma for their activities were divided. Some called personal income tax at a rate of 15% and income tax at the level of 6% adequate, others considered that the rates should be unified.
According to Artem Shtanov, product director at EMCD, any competent regulation and taxation will benefit both the state and the industry.
“Now market participants need only transparent rules of the game for further development. Figuratively speaking, the miner wants to know how to continue his activities and not break the law,” the expert said.
Shtanov stressed that the above numbers can only be spoken about in the abstract, since they are not legally fixed. Nevertheless, he called favorable tax conditions for mining companies, since the current income tax rate in the Russian Federation is 20%.
Roman Nekrasov, co-founder of the ENCRY Foundation, believes that the difference between taxes for industrial miners and individuals is fundamentally wrong. However, the main thing, according to him, will be the discussion of the mechanism for calculating the taxable base:
“It is not yet clear how the costs incurred by miners in the production of cryptocurrencies will be taken into account, and what documents will help prove these expenses.”
For example, Nekrasov said that in order to import ASIC miners from China, the owner of the equipment will have to pay for logistics and customs clearance. It also bears the costs of buying or renting premises for the farm, installing an air cooling system, paying for service and electricity. At the same time, the miner is not obliged to sell the mined bitcoins in the same year.
“Will the miner be able to reduce the taxable base by the expenses that he once incurred for the organization of the farm, or only by the expenses that he incurred in the same tax period when the sale of coins was carried out? Or do Russian legislators think that mining is money out of thin air and miners’ income is so fantastically huge that it’s not worth reducing the tax base for expenses at all? asked Nekrasov.
Due to the lack of tools for Rosfinmonitoring to track the withdrawal of bitcoins mined in the Russian Federation, it is still an act of goodwill for miners to come out of the shadows, he added. The expert suggested that the authorities focus on finding favorable conditions and preferential regimes for miners, and not on prohibitive methods.
In turn, Roman Zabuga, partner of the international operator of data centers for cryptocurrency mining BWC UG, is convinced that Rosfinmonitoring will have no difficulty setting up the infrastructure to track the withdrawal of bitcoins owned by miners.
“I saw their terms of reference for the development of monitoring. They took into account all the details,” he said.
Zabuga called the proposed tax rates adequate. According to him, the calculation of profit should be carried out from the moment of the transition of cryptocurrencies to fiat.
“If the crypto is cashed out through third, fourth parties, the miners will not be liable for this tax liability. But in the end, all the crypto that the miner receives is converted into fiat. This is especially true for the Russian Federation, because there is nowhere to spend cryptocurrencies in the country,” he explained.
Since January 1, 2021, the law “On Digital Financial Assets” has been in force in the Russian Federation. It recognizes cryptocurrencies as property and prohibits using them to pay for goods and services in the country.
Regarding the potential outflow of cryptocurrency from the Russian Federation, Zabuga said that miners would still have to pay the tax – “if not in Russia, then in another jurisdiction.”
Andrey Loboda, PR director of data center operator BitRiver, described the current approach of the Russian authorities as “balanced and reasonable.” To minimize the difficulties of tax administration, he recommended that regulators establish closer interaction with industry entities.
The head of Comino, Evgeny Vlasov, believes that it is impossible to set up the infrastructure to track the withdrawal of bitcoins.
“The only thing you can take taxes from is bank accounts, as they are transparent to the tax authorities. Until the money is there, no one can track the assets in cryptocurrencies. Now many are paying with cryptocurrency just in order to avoid problems with the tax,” the expert said.
In his opinion, only a unified tax rate, as well as transparent and convenient working conditions, can bring mining out of the shadows. He added that in the case of the cryptocurrency market, the state has a very limited toolkit of influence.
“Miners can stay in the shadows or go abroad. This segment of the business cannot be forced, it can only be negotiated with,” Vlasov emphasized.
Bitfury Group CEO Vadim Krutov is convinced that Russia has unique prerequisites for the development of the mining sector. However, the existing regulatory uncertainty is forcing Russian investors to invest in foreign projects, creating jobs and increasing the GDP of other countries.
The proposed tax rates, he said, do not look high compared to other jurisdictions. For comparison, in the US and Canada, depending on the state and various benefits, corporate income tax is 21-38%.
“The annual investment in the mining sector in the US is measured in billions of dollars. The level of country risks in the Russian Federation is considered to be higher, therefore it is quite reasonable to offer more attractive taxation conditions – this way big capital will have enough incentives to choose Russia,” Krutov said.
One of the problems that the regulator has to solve is the problem of “landing” income in the Russian Federation. The expert notes that at the moment, transactions are often structured using foreign jurisdictions, in which most of the profits are shown, while the taxable base in the Russian Federation remains minimal. The Kazakh regulator, for example, tends to lump-sum mechanism industry taxation.
“In the US, where tax-risk options for structuring operations are severely punished, and the judiciary is considered objective and impartial, miners prefer to show income in full. Accordingly, for the US tax authorities, the problem of identifying the taxable base is less acute. Russia will have to analyze foreign experience, perform a comprehensive analysis of the situation and choose the best mechanism,” commented a top manager of Bitfury Group.
Recall that the desire of the Central Bank of the Russian Federation to completely ban mining in the country did not find the support of experts. They called all the arguments of the regulator untenable.
At the moment, the consolidated position of the authorities is that mining should become the subject of regulation. The corresponding scenarios the Russian government will prepare by 11 February.
According to the proposal of the head of the State Duma Committee on Industry Vladimir Gutenev, personal income tax when converting cryptocurrencies to fiat cannot be less than 15%, and the minimum income tax rate for mining companies and individual entrepreneurs should be at least 6%.
According to analysts, even with a simplified taxation system, the amount of taxes collected from the Russian crypto market can be up to 1 trillion rubles a year.
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