While cryptocurrency does not hold a legal status in Ukraine, a tax of 19.5% will levy on Ukrainians profits from crypto-related activities like trading and mining. As the question regarding what do crypto investors owe the state grips the nation across the Globe, a high-ranking official from the Finance Ministry in Kiev explains the Crypto taxing scenario in the country.
Like most nations, Ukraine wants to tax the incomes and profits incurred by citizens via cryptocurrency. On paper, nothing seems wrong with it but the governments are demanding their share without doing their part of regulating the space and legalizing digital assets. Now that seems a little unfair.
According to Ukraine’s deputy-finance minister Sergey Verlanov, the taxation around cryptocurrencies is often exaggerated. He simplifies the same in an interview with Ekonomicheskaya Pravda:
“Two types of operations are possible with cryptocurrency – mining and trading. So, let’s say we bought bitcoin for 1,000 hryvnias; then we were lucky and it went up to 2,000 hryvnias; then we left bitcoin and credited the funds to a bank card. The change is 1,000 hryvnias. We impose income tax on it,” he further elaborates “The rate is 19.5% – whether this is a lot or a little, is a rhetorical question.”
While he notes that Ukranian government hasn’t given cryptocurrency a legal status in the country, he insists that it is a common item, subject to turnover. He said.
“Under the Civil Code of Ukraine – this is an intangible property,”
To clarify further puts forward his “favorite comparison,” that Trading bitcoins is like buying and selling tanks in World of Tanks, the popular online game.
On the brighter side for Crypto enthusiasts, Verlanov believes that Ukraine needs to determine the legal status of cryptocurrencies. The deputy finance minister thinks that crypto exchanges should act like tax agents as the cryptocurrency is bought on an exchange, the law should oblige traders to declare their income and indicate its source.
He also points out the two options that Ukrainian taxpayers currently have when reporting their crypto incomes
“We already have deputies who have submitted electronic declarations and reported their crypto assets. Some declared them in the ‘property’ section, others in the ‘financial assets’ section. Both interpretations can be used since cryptocurrency does not have a legal status yet.”
Many aspects of crypto regulation remain unclear in Ukraine as there is no dedicated legislation for it. While cryptocurrencies are gaining popularity, there are still unregulated despite the three bills filed in the Rada since last October. However, A fourth draft is expected in September, which will deal with cryptocurrency taxation. The proposal is to introduce a temporary tax regime in the sector until 2025, with a 5% tax on profits from cryptocurrency trading and mining. Tax exemptions for crypto-to-crypto transactions and purchases of goods and services with coins are also proposed.
Last month the Financial Stability Council of Ukraine approved a regulatory concept for the crypto space. The body includes representatives of the National Bank of Ukraine (NBU), the National Securities and Stock Market Commission (NSSMC), the Deposit Guarantee Fund, the Ministry of Finance, and the National Financial Services Market Commission.