Russian President Vladimir Putin has signed a bill into law that recognizes crypto, including Bitcoin, as property. This landmark legislation brings a clear taxation framework to the digital asset industry in Russia, providing much-needed clarity and reassurance to digital asset investors.
Implications of Crypto “as Property”
According to the law, mining and selling digital assets are exempt from value-added tax (VAT). Services related to crypto transactions are also exempt from VAT. However, operators of mining infrastructure must inform tax authorities about who is using their services to mine crypto.
The law also outlined how crypto will be taxed. Digital assets obtained through mining will be considered income and taxed accordingly for individuals. The tax rates, set at 13% for income up to 2.4 million rubles ($22,643) and 15% for income above that amount, are reportedly designed to ensure a fair and just treatment of crypto income.
The crypto law further introduced some restrictions on tax structures for organizations and individual entrepreneurs involved in crypto mining and sales. Meanwhile, the crypto regulations will be officially published on a government website or other official channel. Once they are formally published, they will become enforceable and legally binding.
Notably, some parts of the law may have a delayed implementation or a phase-in period to allow for a smooth transition. These provisions will provide temporary relief or exceptions to help individuals or organizations adapt to the new law.
Why the Crypto Law?
Russia has been exploring using crypto for international trade to bypass Western sanctions and reduce its reliance on the US dollar. In response to the expanded U.S. sanctions in June, the Russian parliament passed bills in July to test digital assets for cross-border payments under central bank supervision, which President Putin signed into law.
In a similar move, Hong Kong also wants to strengthen its position as a crypto-friendly hub. However, while Russia taxes individuals and organizations, its authorities will do the opposite. The government recently proposed a plan to exempt certain establishments, including hedge funds and private equity funds, from paying taxes on gains made from crypto trading and investments.
