The Federal Tax Service (FNS) in Russia has announced plans to implement a tax system for crypto miners that would tax them on their unrealized gains, meaning they may have to pay taxes on coins they have yet to sell. The head of the Interregional Inspectorate for the FNS’ “Largest Taxpayers” group, Alexey Katyayev, revealed these plans at a meeting of the Industrial Mining Association. The proposed “two-stage” tax system would involve ordering miners to make advance payments on the cryptocurrency they mine, which would become payable once they receive the coins in their wallets. Katyayev mentioned the possibility of taxing miners when they move or sell the coins from their wallets, depending on whether the value of the coins has increased or decreased during that time.
Katyayev also clarified that miners would not be able to offset losses from their crypto mining activities against profits from other business operations, such as manufacturing. However, he did mention that crypto mining activities would be exempt from value-added tax (VAT). This exemption is due to the fact that mined cryptoassets do not have a specific monetary value recognized in Russia’s legal framework. In addition, home-based miners would be required to pay personal income tax on their profits, and a forthcoming register of crypto miners would collect detailed information about mining companies, data center locations, energy sources, and more.
Industry experts in the Russian crypto mining sector have generally welcomed the news of the proposed tax system, acknowledging that it would bring more transparency to the industry. Oleg Ogienko, Deputy General Director for Communications at BitRiver, expressed optimism that the tax system would enable companies to operate more efficiently and enhance competition within the industry. Timofey Semenov, the CEO of Intelion Data Systems, agreed with this sentiment, stating that increased transparency would create opportunities for major players to enter stock exchanges. Russian crypto miners are estimated to pay a collective annual tax bill of up to $616 million under these new regulations.
In response to the tax plans, Russian miners have expressed a mix of reactions, with some highlighting the potential benefits of increased transparency and competition within the industry. The requirement to pay taxes on unrealized gains may pose a challenge for some miners, especially those who may have to pay taxes on the coins they mine before selling them. The exemption of crypto mining activities from VAT has been viewed as a positive development for the industry, providing relief from additional tax burdens. The upcoming registry of crypto miners will require detailed disclosures from mining companies, which may lead to a more regulated and transparent environment for the sector.
Overall, the implementation of the proposed tax system for Russian crypto miners is expected to bring significant changes to the industry, with increased transparency, competition, and tax obligations for miners. The exemption of crypto mining activities from VAT may provide some relief to miners, while the requirement to pay taxes on unrealized gains presents a new challenge. The forthcoming registry of crypto miners aims to collect comprehensive data on mining companies, contributing to a more regulated and transparent environment in the Russian crypto mining sector. Industry experts hope that these changes will pave the way for greater participation of major players in the industry and potentially lead to increased opportunities for miners in the future.
