The Russian Federal Tax Service (FNS) has recently announced plans to tax cryptocurrency miners on their unrealized gains, marking a significant shift in how the country plans to regulate its booming crypto-mining industry. According to a report by Vedomosti, the FNS is working on a two-stage tax system that would require miners to pay taxes not just on their profits from sales but also on the cryptocurrency they mine, even if they haven’t sold the coins yet.
Two-Stage Tax System for Crypto Miners
Alexey Katyayev, head of the FNS’ Interregional Inspectorate for the “Largest Taxpayers” group, revealed the details at a meeting of the newly established Industrial Mining Association. He explained that the first stage would involve miners making advance tax payments as soon as the cryptocurrency enters their wallets. In the eyes of the FNS, this would constitute a taxable event. Even if miners don’t move their coins from mining pools to personal wallets, the act of receiving mined coins would trigger the tax.
The second stage comes into play when miners sell or transfer their assets from corporate wallets. At this point, if the value of the mined cryptocurrency has increased, miners would have to pay additional taxes on the unrealized gains. However, if the value decreases, miners can deduct these losses from their overall taxable amount. Katyayev clarified that no final decision has been made, and discussions are ongoing.
Implications for Large Firms and Home-Based Miners
The tax changes could significantly impact both large companies and individual miners in Russia. Major firms like Gazprom, which recently launched a crypto-mining subsidiary, may need to reconsider their strategies. Katyayev pointed out that companies would not be allowed to offset losses from one part of their business against profits from another. For instance, a firm mining cryptocurrency alongside producing frying pans cannot merge the financial outcomes of both activities.
This taxation plan won’t just affect big companies; home-based miners will also face new obligations. Individuals who mine cryptocurrency from home will need to pay personal income tax on their profits. This move could formalize the growing number of small-scale miners in Russia who have previously operated without much government oversight.
Crypto Mining Exempt from VAT
In a potential boon for the industry, Katyayev confirmed that cryptocurrency mining activities will be exempt from Value-Added Tax (VAT). This decision stems from the fact that cryptocurrency is not legally recognized as a currency in Russia. Its use is limited to government-controlled sandboxes for international trade, so the mined assets are seen as having no official monetary value.
Mining Register and Reporting Requirements
The FNS also plans to introduce a national crypto-mining register. All registered miners, including large-scale firms and individuals, will be required to submit detailed information about their operations. This includes the names of companies, data centre locations, and the energy sources used to power mining rigs. Miners will need to provide information on their rig suppliers and the total amount of cryptocurrency they mine, though some details will remain confidential to ensure security.
With estimates suggesting that Russian miners could collectively pay up to $616 million in taxes annually, this new tax regime could reshape the country’s crypto-mining landscape.