Ukraine Deems Crypto Income Taxable Making Investors to Cough Up 19.5% Fees for Profits
Ukrainians have not had much experience in the regulatory areas of cryptocurrency yet, so their policies are in a state of flux. Right now, just like digital funds and financial assets for users, any investor that turns a profit on these platforms will be subject to a 19.5% income tax. This decision comes directly from officials with the Finance Ministry in Kiev. However, when evaluating the funds during tax time, the investors in crypto will have the choice of classifying the profit as either property or financial assets.
Many economies around the world are struggling to figure out exactly how much crypto investors should have to hand over to the state for their profits. After all, this is basically an income like someone could make with the stock market, but it still needs regulations. The authorities in most countries have not figured out the extent of their regulations guiding crypto and blockchain technology, but they are still rushing to find a way that investors have to pay up. Just like in Ukraine’s case, countries struggle to find a way to tax these funds, considering that so few places actually consider them as digital assets.
According to Deputy-Finance Minister Sergey Verlanov, it seems like the actual concerns in Ukraine are significantly simpler than what some sources say. In an interview with Ekonomicheskaya Pravda, he even said the situation was more exaggerated than anything, adding,
“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. The rate is 19.5% – whether this is a lot or a little, is a rhetorical question.”
Even with no legal standing, crypto is incredible common in Ukraine. Verlanov noted, “Under the Civil Code of Ukraine – this is an intangible property.” Basically, Verlanov compared the situation to that of purchases and sales in a popular game in the area – World of Tanks.
Still, Verlanov believes that the best way to handle anything to do with this industry is to start by establishing the legal status of these tokens and coins. With this change, he feels that the exchanges that accept them should take on the role of tax agents. Whenever tokens are purchased on any of the permissible exchanges, he wants the regulations to force traders to declare the source of their “income.”
Right now, Ukrainian citizens have two different options regarding the report of what they make from cryptocurrency. Verlanov explained,
“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.” His concern is that the lack of legal status can make it impossible for the government to exert their power over taxation with these transactions.
Since there is still a standstill regarding the state of legislation, there are many aspects of the industry in question. Right now, there is somehow no regulation, even with three separate bills being filed within the Rada almost a year ago. September is expected to bring a fourth draft, which will deal with the concept of taxing crypto income. The writers of these drafts said that there could be a temporary policy in place for the next 7 years, including 5% tax on profits. However, the draft also includes exemptions for purchases that involve goods or services, along with exemptions for transactions that are specifically crypto-to-crypto.
That is not to say that there has been no progress at all. A regulatory “concept” was approved by the Financial Stability Council of Ukraine regarding cryptocurrency. This group includes members of the following organizations, which helps to keep the decisions balanced and fair:
- National Bank of Ukraine (NBU)
- Ministry of Finance
- Deposit Guarantee Fund
- National Securities and Stock Market Commission (NSSMC)
- National Financial Services Market Commission
Based on the opinion of Verlanov, the best options to overseeing the regulatory efforts for crypto are the NSSMC and NBU.