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How Should a Miner Pay Taxes on Cryptocurrency? (Part II)

2024-12-02 11:00
In the first part, we covered tax issues for individuals and companies engaged in cryptocurrency mining.
In this article, we aim to clearly explain how to pay taxes if you do not mine cryptocurrency but simply buy or sell it.
1. Taxes for Individuals

✔️ Purchasing Cryptocurrency
If you acquire cryptocurrency or receive it as a gift, your tax obligations depend on the source:
  • If the donor is a family member or close relative (Clause 18.1, Article 217 of the Russian Tax Code), no tax is due.
  • Inheritance of cryptocurrency is also tax-free.
  • In all other cases, income from receiving cryptocurrency is taxed progressively: 13% (or 15% for annual income over 2.4 million RUB).

✔️ Selling Cryptocurrency and Earning Profit
If you sell cryptocurrency at a profit (i.e., the selling price exceeds the purchase price), you must pay personal income tax (PIT):
  • Tax rate: 13% (or 15%).
  • You can reduce the taxable base by deducting documented purchase expenses.
  • If the cryptocurrency was mined and tax was already paid on it, you can deduct the previously taxed amount from the sale income (Clause 6, Article 210; Subclause 5, Clause 1 and Subclause 2, Clause 2, Article 220 of the Tax Code).

✔️ Restrictions for Self-Employed, AUSN and PSN Taxpayers
  • Individuals under the Self-Employment Tax Regime (NPD) or the Automated Simplified Tax System (AUSN) cannot legally mine, sell, or buy cryptocurrency (Clause 9, Part 2, Article 4 of Federal Law No. 422-FZ; Clause 35, Part 2, Article 3 of Federal Law No. 17-FZ).
  • Violations may result in the loss of special tax status and additional taxes, interest, and penalties.
2. Taxes for Companies

✔️ Buying and Selling Cryptocurrency
  • Income from cryptocurrency sales is subject to corporate income tax (25%).
  • Revenue may be reduced by the cost of purchasing the cryptocurrency and related expenses.
  • The sale income is determined by the actual transaction price but not less than 80% of the cryptocurrency's market quote. (We discussed market quote determination in Part I.)
  • If cryptocurrency is transferred free of charge, income is calculated based on the market quote on the transfer date.

✔️ Buying and Selling Cryptocurrency under Simplified Tax Regimes (USN, ESHN)
  • Companies under the Simplified Tax System (USN) and Unified Agricultural Tax (ESHN) cannot mine but may buy and sell cryptocurrency (Subclause 5, Clause 6, Article 346.2 and Subclause 23, Clause 3, Article 346.12 of the Tax Code).
  • Income from sales is determined by the transaction price; however, if the price is below 80% of the market quote, the tax base must be calculated using 80% of the market value (Clause 3, Article 282.3 of the Tax Code).

✔️ Taxes for Mining Pool Operators and Mining Infrastructure Providers
  • If you operate a mining pool or provide mining infrastructure, your tax obligations are calculated based on service revenue rather than mined cryptocurrency. These companies offer infrastructure and technology to other miners rather than mining themselves.
  • Service revenue is subject to corporate income tax (25%).
  • For USN companies, the tax rate is 6% (on income) or 15% (on income minus expenses).
  • VAT is applicable if services are provided to Russian clients, but may not apply for services rendered to foreign clients (Article 148 of the Tax Code).
  • You must keep separate accounting records for service operations and any potential own mining activity.
  • All client transactions must be documented (contracts, service acts, invoices).
Taxation of cryptocurrency transactions depends on the taxpayer's status, type of activity, and tax regime. Stay updated on legislation to avoid tax risks.