The Federal Tax Service (FNS) has unveiled plans to tax Russian crypto miners on unrealized gains, meaning they may have to pay taxes on coins they are yet to sell.
Per the Russian newspaper Vedomosti, the FNS wants to launch a “two-stage” tax system for crypto miners.
Alexey Katyayev, the head of the Interregional Inspectorate for the FNS’ “Largest Taxpayers” group, explained the plans at a meeting of the recently formed Industrial Mining Association.
However, Katyayev, conceded that while tax officials want to apply a “classical system” to miners, “no final decision has yet been made” on the matter.
Unrealized Gains: Moscow’s Crypto Tax Plans
Katyayev spoke of the possibility of ordering miners to make “advance payments on mined cryptocurrency.”
This, he said, would be the “first stage.” And, he explained, this would become payable once miners receive coins in their crypto wallets.
“Once the miner has the right to dispose of their cryptoassets,” a taxable event would have occurred, in the FNS’ view.
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This would even be the case “if the cryptocurrency mined by a miner” is “located at the address in a mining pool” and “not moved to a personal address.”
Katyayev went on to speak of a “second stage,” when the miner moves the coins out of corporate wallets or “sells cryptocurrency.”
“If the coin has risen in price since the first tax payment, the company must pay the tax on the missing profit.”
Russian Federal Tax Service official Alexey Katyayev
However, if tokens have fallen in price in this same period, miners will be able to write this off as a “loss,” Katyayev said.
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VAT Exemption
The FNS official also gave a colorful example to illustrate tax-related issues for the growing number of major Russian firms looking to combine crypto mining with their core businesses. He said:
“If your company is engaged in the production of, for instance, cast iron frying pans and crypto mining, you cannot transfer your losses from crypto mining to your frying pan production. In the same manner, you cannot transfer losses from the production of frying pans to crypto mining.”
This comment may well have been aimed at the likes of Gazprom, the oil and gas giant. Gazprom has recently launched a crypto mining subsidiary, and is reportedly set to unveil a 5,000-rig “farm” in the historic city of Veliky Novgorod.
However, Katyayev also hinted at a silver lining for Russian miners. The FNS official said that crypto mining “will not be subject to VAT.”
He explained that this was because mined cryptoassets have no specific monetary “value” in Russia.
This, the media outlet explained, is due to the fact that – legally speaking – crypto transactions are only permitted within the confines of government sandboxes for international trade firms.
Home Miners Also Facing Tax Bills
Katyayev also issued a warning for home-based miners, claiming that “individual miners” would need to pay “personal income tax” on their profits.
The FNS added that the nation’s forthcoming “register of crypto miners” will contain the following details:
- Company name
- Data center locations
- Energy sources
- Client lists
Miners will also need to tell the government where they get their crypto mining rigs from, how they imported these rigs, and how much electricity they consume.
In addition, each miner on the register will need to publicly declare how much crypto they mine, a first for Russian firms.
They must also submit other details, the FNS said, but these will remain confidential, with a need to maintain “maximum security.”
Industry Happy With Tax News
Oleg Ogienko, Deputy General Director for Communications at the mining firm BitRiver, welcomed the news, even if it means miners will soon need to pay tax on their unrealized gains.
He said this would “allow companies to further build their business activities as efficiently as possible.”
Ogienko added this would also “increase competition in the crypto mining industry.” Timofey Semenov, the CEO of BitRiver rival Intelion Data Systems, concurred.
Semenov said that the tax plans and the new registry system would help the sector “become as transparent.”
“Transparency in the industry will give major players the opportunity to enter stock exchanges.”
Timofey Semenov, CEO of Intelion Data Systems
Russian crypto miners have told media outlets they expect to pay a collective annual total of up to $616 million in taxes.
The post Russia Wants to Tax Crypto Miners on Unrealized Gains appeared first on Cryptonews.
