The Russian Committee for Digital Economy is a government department responsible for regulating and forming digital policies relating to economic and business development in Russia.
The Russian government’s proposed “Digital Economy” national project is set to run from 2019 to 2024.
The Digital Economy project aims to develop a system of legal regulation for digital assets and cryptocurrency based on a flexible approach in each sector.
Essentially, the Russian government has decided that if people can make profit through cryptocurrency, they should pay tax as well.
The objectives of the project include:
- The development and implementation of digital and information technologies (like blockchain) in all sectors of business, private entrepreneurship, state management, and the social and public life of Russian citizens.
- The formation of a competence centre to support and assess the impact of modern digital technologies on improving the efficiency and competitiveness of the Russian economy.
- The prevention of tax evasion through anonymous virtual money.
- The reduction of fraud in the trading sector.
- The prevention of terrorism financing through cryptocurrency.
The Committee has also created a website which covers its future plans for developing a strategy for digital money in Russia. By 2024, the state intends to carry out a comprehensive digital transformation of the Russian economy.
The creation of rules and crypto regulations should help increase adoption of cryptocurrencies in Russia. At the moment, crypto is still a grey area in the country, and the legal status of cryptocurrency has not yet been fully determined.
Crypto taxation in Russia
By 2024, the state intends to carry out a comprehensive digital transformation of the Russian economy and social sphere.
To do this, it is necessary to develop legislation on digital technologies, modernise the digital infrastructure, introduce digital practices in all key areas of the economy and government, and organise training for the transition period.
While applying taxes on income from cryptocurrencies is easy, it is not always clear to traders how to pay tax. Tax authorities can also face difficulty working out how to apply any new taxation rules.
Collecting taxes from cryptocurrencies is difficult even among the most developed economies in the world. The key problem is that the tax authorities simply do not know who conducts transactions with cryptocurrencies, to what extent, and the total profit.
In Russia, taxes must be paid on capital gains or on profits. But cryptocurrencies are extremely volatile, and the exchange rate on different exchanges can differ significantly.
Therefore, when calculating the tax, it is not clear how to determine the value of currencies at a given time or how to take into account ICOs and hard forks.
Responsibility for the non-payment of tax falls on the individual crypto owners. Already, the Federal Tax Service is threatening a prison term of up to five years and a fine of up to $300,000 for anyone convicted of tax evasion from cryptocurrency income.
Recently, the Committee suggested that cryptocurrency was recognised as a property. This means that people need to pay tax on cryptocurrency at a rate of 13% on the income received.
However, the Federal Tax Service has not yet created separate rules for calculating personal income tax on cryptocurrency. Therefore, it is accrued on standard grounds similar to the sale of real estate, cars, and other income.
Cryptocurrencies are a hot topic in Russia as the government seeks to legalise turnover in order to control its use and introduce taxation.
At the moment, cryptocurrency in Russia does not have any clearly defined taxation rules, but that will change soon with the introduction of the Digital Economy project.
The current uncertainty and lack of clarity puts pressure on crypto-investors and miners, as they do not know what to expect.
The complexity of the Russian national tax system combined with a lengthy procedure for registering and calculating all profits and losses over a user’s entire history of transactions can be a real nightmare for Russian citizens.
However, the Committee for Digital Economy is aiming to automate the whole process using artificial intelligence, and with the project set for completion in 2024, Russian crypto holders should expect more clarity and results soon.
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