So, the Russian government just gave a thumbs up to the proposed bill on taxing cryptocurrencies. It cleared its first reading, which is a step forward.
What’s next to turn this into actual law?
The bill has to go through three readings in the State Duma (Gosduma).
1. First reading (done)
2. Second reading
3. Third reading
Basically, during the second and third readings, the wording of the bill could change a lot.
4. Then it gets reviewed by the Federation Council.
5. Finally, it needs the President’s signature to become law.
More details in Russian.
It is important to understand who exactly is involved in the development of this legislative act. The problem is that often such "specific" laws are considered in isolation from the expert community or under the pressure of two or three opinions of individual pro-government experts. Too little discussion will eventually lead to the fact that the law will come out "raw" and will require a lot of refinement. And you could just take your time and discuss everything in detail with those who do this every day.
For those who don't like to click links, I think that this briefing is important and tells it all.
Taxing the Bitcoin related income is a normal direction, but it can be done in many ways, good and bad.
Still, as said, it can change a lot, so ... let's wait and see what happens next.
So they will recognise crypto as property. In short, you will have to report all transactions (buying and selling) if they exceed $8000 per year. If you are late in reporting you pay extra 10 % fee and if you fail to report your fined with 40 %. Long term holdings are not taxed.
It is too early to draw conclusions. It will be necessary to study the law in the third reading when all major corrections are added.
I cannot yet imagine the ways in which the tax authorities will punish tax evaders.
Now in Russia there is not a single Russian cryptocurrency exchange; Russians trade on foreign cryptocurrency exchanges.
It's bad if you never had to pay any tax before but from the point of view of a typical European business owner the taxation isn't unbearable in Russia. 8k a year is a pretty high amount for an average Russian who earns about 600 USD a month. We can say that you're taxed on your cryptocurrency trades only if you're trading the equivalent of your yearly wage and you're not being taxed more than you'd be for your other assets. As evil as taxes are, these look pretty fair.
If we look at the dynamics and price of the same bitcoin? What will we see? It turns out that one deal can already exceed this threshold of 8 thousand dollars. If before this law everyone quietly and peacefully cashed their income from the sale and purchase with a commission, now it will simply make people hide. Yes, in Europe the average taxpayer is used to and knows the "price" of his tax. I assure you - things are quite different in Russia!
That's if the legislative branch is leaning towards passing the bill which means mostly the changes will be on the rates implied for the taxes as well as other minor parts such as the definitions and other rules and regulations. But if they are leaning towards to declining the bill then simply it won't even pass to the final reading at all and the other course of action for them is to create a bill about banning or restricting the crypto industry even further. For me I think the former is better to think about since a taxation regulation for cryptocurrencies is a inevitable thing to happen especially considering that other countries have passed similar laws when it comes to it earlier compared to where Russia is now.
Perhaps I can surprise someone, but soon such "intelligence" will (if not already started) track all transactions that go through electronic payments, including cards. And with cards in Russia, everything is in order for a long time! It turns out the following picture: cryptocurrency as property or transactions associated with it will simply be added to another. Cryptocurrency will not be the first such asset, it will be the last one that has already been tracked. Everything is logical, because the new prime minister is the former head of the tax service.
I feel jealous about the Russians. Here in India, the government has almost finalized their plans for a law, which would make ownership of cryptocurrency a criminal offense which is punishable by 10 years in jail. And then we have countries such as Russia, where there are zero taxes (on long term holdings). But proving that you purchased the coins more than 12 months ago can be challenging. My Bitcoin wallet is having hundreds of transactions. If I want to file for long term capital gains exception, then I need to explain each and everyone of these transactions (which is pretty much impossible).
Russia has a huge shadow market for buying and selling cryptocurrencies. Nobody asks for documents there. Any user can exchange cryptocurrencies for cash.
If the exchange takes place through bank cards, then nothing is indicated in the basis of the payment.
Many exchangers have started to provide cash-in service.
Money is not transferred to the client's card by transfer from another client of the bank. The courier refills the client's card account in cash through an ATM.
Just stay out of the noise for a little while since this is just still a bill and chances are the lawmakers will add or take away some from the existing bills. Remember that the Reserve Bank of India is the strong opposition here but even your Supreme Court have ruled out their unjustified ban against crypto related transactions in the past so chances are there are also lawmakers who have different views with their bill and they might add some exemptions like finding a way for popular cryptocurrencies like Bitcoin and Ethereum co-existing with the planned digital Rupee or this ban for "private cryptocurrencies" will only be applied to new ICOs. Bills are something we don't react on as something final as there will be days/months/years for it to become a law and most of them don't even have the same content/regulations when they become a law.
What happens when this bill is passed? Is there a summary of the things that will happen so a pleb like me can understand it without a hitch, I hope that you will post it here. It is a good thing that they plan to tax bitcoin instead of banning it entirely. The only deciding factor if this is a good tax law is if the individual tax is manageable and not headache worthy.
The Law "On Digital Financial Assets" contains a lot of contradictions. It is possible to own cryptocurrency, but selling cryptocurrency or exchanging it for other goods is a crime. This is a paradox. There are no services in Russia where you can legally buy cryptocurrency and receive purchase documents.
And on sale, the user can be forced to pay tax without using a deduction of purchase costs, because there are no mechanisms for recording these transactions.
If it contains a lot of contradictions, will the bill be passed? Or if I am understanding correctly, this new bill will help with this contradictions? Pretty crazy that Russians are under this law for a long time and their government thinks that there is no problem with the status quo. Hopefully our Russian members can finally be free from this crazy law that can make their transactions in crypto far easier.
If the agenda requires it, then they will accept it. And then they will make amendments and other corrections to the current document for a long time. This is an attempt to keep up with the trend. I am sure if the price of bitcoin continues to fall, then very quickly the topic related to this will leave the pages of news feeds. It is a pity that Russia was unable to become leaders in this direction.
Noticing alot of countries are enforcing laws in their own jurisdictions on having a separate taxation on anyone doing anything involving cryptocurrencies.
As if they are doing this so to deter people in using the currencies such as bitcoin and the like altcoins.
Because will absolutely start to get scared when they hear the word taxes on your cryptocurrency that will begin the process of swirling questions on if they should be holding any bitcoin or even if they should buy and sell their altcoins on exchanges such as binance. Because they generally need to submit their id during KYC so they can trace you in that way if the tax agency comes calling them on doing an audit of your earnings and if your actually paid all your taxes on what you have made.
Think of what is going on with Trump now with the court cases on tracking down on all the taxes he had not paid for the millions he had made during his hay days of Trump towers across the globe.
I thought why there is still no law on cryptocurrencies in Russia?
(current law has more controversy and contention)
If cryptocurrencies are allowed, there will be many scammers who will deceive many people and disappear with their money.
Therefore, this area is very difficult to regulate in a country where laws are formal in nature.
There is a lobby that does not want to be paid for goods in Russia with cryptocurrencies, but regardless of someone's desires, the shadow market is growing very much.
This is definitely a step in the right direction! Russia is a modern advanced country and its government understands the value of integrating and adapting cryptocurrency within its economy, as well as everything connected with it. Further, we will probably face a process of reprisals against those who "did not have time" or did not want to legalize their income from the sale or purchase of cryptocurrency.
I think this step will be very important to make cryptocurrencies legal in Russia, Russia is one of the few countries trying to make cryptocurrencies legal in the country, there are a large number of Russians working in cryptocurrencies so I think this is a smart move from the Russian government to collect taxes by making Cryptocurrencies are legal and this will definitely be in the interest of the country's economy.