Taking a plunge into the current cryptocurrency legislature in Ukraine, recent discussions among lawmakers have shed a light on the ongoing debate regarding cryptocurrency taxation. As Ukraine accelerates its efforts to legalize digital assets within the country, the prospective bill might see a delay due to the ongoing considerations for lower tax rates on crypto income.
Extended Timeline Predicted for Legalization of Cryptocurrency in Ukraine
In a recently conducted interview, Taras Kozak, a key player within Ukraine’s securities regulator advisory group, expressed contrasting viewpoints with Danylo Hetmantsev, the committee head for Finance, Tax, and Customs Policy at the Verkhovna Rada. The latter previously suggested that the bill in question would be adopted swiftly, within the upcoming months. The government’s plan, according to Hetmantsev, aimed at adopting the crypto law by summer of 2025. He spoke of the draft being ready for its initial reading in the early part of the year, followed by a secondary reading in Parliament.
However, the specific details pertaining to the tax measures for cryptocurrencies remain under discussion. In December, Hetmantsev announced a collaborative effort between the Parliament’s working group, the National Bank, and the International Monetary Fund (IMF). They aim to introduce a draft bill in early 2025 which would legalize digital assets within the first two quarters of the year.
Contrary to this, Kozak suggests that the legalization process could extend till the subsequent year. Despite the delay, he remains optimistic that the bill will pass all necessary readings and receive the President’s signature by the conclusion of the current year. That would allow for the income from digital assets to be legitimately taxed thereafter, starting in 2026.
Ongoing Discussions Surrounding Crypto Taxation
With the question of final tax rates on cryptocurrencies being a pivotal aspect, Kozak iterates that Ukrainian businesses and investors operating with digital assets are not opposed to contributing towards the state budget. He mentions a general willingness amongst Ukrainians to pay an estimated 5% tax on their cryptocurrency-based income. The process of taxation, he insists, cannot be put on hold any longer.
In March of 2022, President Volodymyr Zelensky signed the law “On Virtual Assets”, effectively laying the groundwork for regulating the digital asset market within the country. However, the law remains stagnant, awaiting potential amendments to the Ukrainian Tax Code. The absence of these regulations has cost the government considerably in terms of potential tax revenue.
According to Kozak, the best move forward would be to implement a modest tax rate, within the bracket of 5 to 10%. Considering that the state and its essential services, including the army and security forces, rely on these taxes, it becomes imperative to tax all citizen income. The government, as the report confirms, is considering a standard tax rate of 18% on personal income, along with a 5% military levy. There could also be a 23% tax imposed on investors unable to prove their initial investments.
Hetmantsev earlier explained that the country is unlikely to offer tax exemptions to digital assets, as they have adopted a guarded approach after consulting with the IMF and European experts.
FAQs
Why is the legalization of Cryptocurrency in Ukraine delayed?
The legalization process has been delayed due to ongoing discussions regarding taxation measures for cryptocurrency income. Lawmakers are yet to reach a consensus on the tax rates, which is crucial to the legalization process.
What is the proposed tax rate for cryptocurrency income in Ukraine?
While the final decision is yet to be made, some officials suggest a tax rate within the bracket of 5 to 10%. The government is also considering an 18% standard rate on personal income from cryptocurrencies, along with a 5% military levy.
Will Ukraine offer tax exemptions on cryptocurrencies?
According to Danylo Hetmantsev, the committee head for Finance, Tax, and Customs Policy at the Verkhovna Rada, Ukraine is unlikely to offer tax exemptions for digital assets. This decision follows consultations with the IMF and European experts.
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