Large consulting and legal companies have recorded an increase in the submission by Russians of reporting income from cryptocurrency transactions. According to experts, this is due to the tightening of regulation.
According to Izvestia’s publication, citing data from KPMG, PwC, FTL Advisers, Borenius, and the Center for Strategic Research (CSR), in recent months, Russians have begun to withdraw their cryptocurrency revenues from the shadows to pay personal income tax. FTL Advisers partner Maria Kukla noted:
“We observe that Russian residents have begun to voluntarily reflect income from transactions with digital assets (mainly with cryptocurrencies) in tax returns.”
However, the trend is not yet widespread and it is too early to say that the majority of cryptocurrency owners want to declare their income. By law, taxpayers must submit their income tax return by May 1. During April, the number of cryptocurrency owners wishing to pay personal income tax may grow, especially by the end of the month.
The growth in the number of declarations mentioning income from cryptocurrencies is also noted by Evgeny Sivushkov, Director of Individual Taxation at PwC Russia. In his opinion, this may be due to the adoption last year of the law “On digital financial assets”, which entered into force on January 1.
According to Maksim Bashkatov, head of the Legal Development Department of the CSR, there is a “bad place” in the law – the owners of cryptoassets can count on judicial protection only if they are declared. At the request of Izvestia, the Federal Tax Service explained that the procedure for taxing individuals’ income from operations with cryptoassets in general has already been clarified. The FTS referred to the letter of the Ministry of Finance No. 03-04-07 / 33234 dated May 17, 2018.
“The tax base for transactions in the sale and purchase of cryptocurrencies is determined in rubles as the excess of the total amount of income received by the taxpayer in the tax period from the sale of the corresponding cryptocurrency over the total amount of documented expenses for its acquisition.”
Donat Podniek, partner of KPMG in Russia and the CIS, drew attention to the fixation of any non-cash transactions when buying or selling crypto assets in the history of the organization that conducts them. The tax service can access this data even if the transactions were carried out outside of Russia.
According to Maxim Bashkatov, it is still unclear exactly how to calculate the tax and declare crypto assets. There are no official cryptocurrency exchanges in Russia on which it would be possible to determine the value of a cryptoasset when buying and selling. In addition, personal income tax is paid in rubles, so the question arises of the correctness of determining the price of the cryptocurrency in relation to the ruble.
As Sivushkov notes, since the draft law of amendments to the Tax Code on taxation of digital currency has already been approved by the State Duma in the first reading, more and more cryptocurrency owners will begin to whitewash their income in the near future. However, additional clarifications will be needed from the Ministry of Finance and the Federal Tax Service regarding the taxation rules for these transactions.
Recall that changes to the Tax Code are intended to oblige citizens to declare transactions with cryptocurrencies. The Federal Tax Service is not going to change this paragraph of the draft law even after criticism from experts.