Russian tax authorities’ focus on crypto holdings may have led to the surge
Russians have been increasingly disclosing their cryptocurrency holdings for tax purposes over the past several months, according to recently published information.
A report released earlier today by Russian news agency Izvestia explores the increase in disclosures by Russians, based on data from consulting and law firms such as KPMG, PricewaterhouseCoopers, and FTL Advisers, as well as Moscow-based public policy think tank the Center for Strategic Research.
“We’ve observed that Russian residents have started voluntarily disclosing income from operations with digital assets, mainly with cryptocurrency, in tax declarations,” FTL Advisers partner Maria Kukla said.
Kukla also noted that since the current tax reporting period in the country ends on May 1st, it is perhaps too early to comment decisively on the issue, with the possibility that the trend changes as more tax declarations are submitted. FTL Advisers and PwC Russia have declined to officially comment on the issue.
Addressing the development, Evgeny Sivoushkov, the director of PwC Russia’s division of individual taxation, confirmed that this interest in disclosing crypto holdings is newfound, and the number of individuals who have made declarations has risen during the current tax period.
Sivoushkov believes that the “On Digital Financial Assets” law that was adopted this year may have significantly fuelled the new trend. He also noted the increased focus of the Russian tax authorities and compliance services on the origin of income reported by individuals, especially income derived from foreign assets.
The surge in the number of voluntary crypto tax filings comes amid talk of the formal enactment of a cryptocurrency taxation law, first described in a 2018 Ministry of Finance (MoF) letter to the Federal Taxation Service of Russia. Such tax legislation is currently not in place.
According to the MoF letter, the tax base from crypto trading will be defined in Russian rubles as the “excess of the total income amount received by taxpayers from the sale of a cryptocurrency over the total amount of documented expenses for its acquisition.”
Russia is also moving towards new legislation that will mandate Russian residents to pay an income tax on their gains from crypto trading. The bill, requiring residents to report crypto transactions if their total amount exceeds 600,000 rubles (around $7,800) on an annual basis, was approved after the first reading by the State Duma in February.