Private individuals mining cryptocurrency may expect a higher tax burden than businesses involved in the industry, a high-ranking member of the Russian parliament has indicated. While the extraction of digital currencies is yet to be regulated in Russia, authorities lean towards recognizing it as an economic activity, which will allow the government to tax mining profits.
Profits from cryptocurrency mining in Russia can be taxed like securities
The personal income tax levy for individual crypto miners who withdraw their profits in the traditional financial system cannot be less than 15%, the head of the State Duma’s industry committee recently said. State, Vladimir Gutenev. The lawmaker added that the minimum tax rate for businesses or sole traders engaged in minting digital currencies as a business activity should be at least 6%.
Quoted by the business news portal Finmarket, Gutenev explained at a press conference that if cryptocurrencies are to be treated as securities in the Russian Federation, income tax must be paid when the mined coins are cashed out.
The MP was referring to the mining rewards that can be received by both natural and legal persons. These payments for processing blockchain transactions are credited to cryptocurrency wallets. Miners can choose to convert digital coins into fiat currency.
The legal status of crypto mining, and a range of other activities related to cryptocurrencies, is yet to be defined in Russia. A debate between government institutions is currently underway to determine Moscow’s regulatory approach.
Russia’s Central Bank has proposed a blanket ban on operations such as issuing, trading and mining private digital currencies it calls “currency surrogates”. However, the monetary authority found itself isolated, with the Ministry of Finance, other departments and regulators favoring legalization under strict rules rather than outright bans.
The federal government, which sides with the finance ministry on the matter, prepared a regulatory roadmap for the sector and added mining to the document. President Vladimir Putin recently highlighted Russia’s competitive advantages as a mining destination while industry watchers have doubted that banning coin minting is practically possible.
Russia’s role in the crypto mining scene has grown since China launched a crackdown on the industry in May last year. A study by the Cambridge Center for Alternative Finance ranked Russia third after the United States and Kazakhstan in terms of mining capacity. As of August 2021, the energy-rich nation accounted for over 11% of the global bitcoin hashrate.
