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Article Russian Federation: New Bill Defines Cryptocurrency, Proposes Tax Regulations

(Jan. 11, 2021) On December 1, 2020, the government of the Russian Federation introduced to the State Duma (the country’s parliament) Bill No. 1065710-7 on Amendments to Parts One and Two of the Tax Code of the Russian Federation.

The bill, proposed in mid-November by the Ministry of Finance, includes provisions that would regulate the circulation and possession of cryptocurrency and define responsibility for violation of the rules established by the bill.

The bill requires that citizens, individuals, and legal entities operating in the Russian Federation declare their cryptocurrency holdings and establishes tax liability for unlawful failure to declare information or declare false information about transactions with cryptocurrency. The amendments contained in the bill provide for the recognition of cryptocurrency as an “asset” and set out its taxation accordingly.

At the beginning of December 2020, when the bill was proposed, its adoption was scheduled for the end of December. However, the bill has not yet been approved and is still under consideration by the State Duma. Its adoption is now expected during the State Duma’s spring session.


As the use of cryptocurrencies and crypto tokens has increased in the country, the government of the Russian Federation has engaged in discussions about how to legally define these products, incorporate them into the legal system, and determine the procedures for taxing them. On July 31, 2020, the president of the Russian Federation, Vladimir Putin, signed Federal Law No. 259-FZ on Digital Financial Assets and Digital Currencies. This law regulates relations concerning the issuance, recording, and circulation of digital financial assets (DFAs). (Federal Law No. 259-FZ, art.1, §§ 1, 2 & 3.)

Under the new law, DFAs are digital rights that can be viewed as analogues of issued securities but placed through a blockchain. DFAs include monetary claims, the ability to exercise rights to securities (including the rights to demand their transfer), and the right to participate in the capital of non-public stock companies. (Art. 1, § 2.) The law also considers Security (Utility) Tokens to be digital financial assets and requires that they be treated as such.

Among other provisions, the law defined digital currency as a digital code used as a means of payment and as a savings tool (an investment). (Art. 3.) However, residents of the Russian Federation are not allowed to receive digital currencies as payment for goods, work, or services. (Art. 14, § 5.) In addition, the law prohibits distributing any information about possible settlements in digital currencies; offering and accepting digital currency as a payment for transferred goods, rendered work, or services; or using any other method of paying in digital currency. According to the law, digital currency is not legal tender for payments in Russia, and the Russian ruble remains the only official monetary unit. (Art. 14, § 7.)

The law prohibits exchange operations with cryptocurrency on the territory of the Russian Federation, and makes judicial protection of claims related to such operations and/or transactions possible only if the digital currency possessions or transactions were declared in accordance with this law. (Art. 14, § 6.) Most of the provisions of the law will take effect on January 1, 2021.

The New Bill and Potential Taxpayers’ Obligations

The new bill on taxation of cryptocurrency aims at implementing the Federal Law on Digital Financial Assets and Digital Currencies.

The bill stipulates that cryptocurrency must be treated as “personal assets” subject to a mandatory declaration with the Russian tax authorities (Bill No. 1065710-7, art. 38, § 2) and obligates citizens, residents, registered legal and corporate entities, registered representations of foreign companies, and international institutions on the territory of the Russian Federation to inform authorities about digital currency possession rights they have obtained, digital currency transactions, and digital currency balances. (Ch. 21, art. 1, § 16.)

The bill states that failing to present timely reports about operations involving digital currencies and presenting inaccurate information constitute tax offenses. (Art. 129(15), § 4.) In such cases, the penalty must be 10% of the total value (in rubles) of the cryptocurrency received or cryptocurrency transferred. The value of the cryptocurrency reported will be calculated by the national tax agency on the basis of the market value at the time of the transaction.

Furthermore, those individuals and legal entities that have the right to use digital currencies are obligated to inform the tax authorities of such a right, the turnover of their accounts, and the balances in cases where the amount of operations exceeds the equivalent of 600,000 rubles (about US$7,800) in a calendar year.  Failure to inform the authorities is punishable by a fine of 50 thousand rubles (about US$670). Failure to provide data on transactions with cryptocurrency and nonpayment of tax on transactions settled using digital currency is punishable by a fine of 40% of the unpaid taxes. (Art. 129, § 5(8).)

The rules for mandatory tax reporting will enter into force on April 30, 2022. Before that, declaring ownership of cryptocurrency is voluntary. (Art. 3, §§ 1, 3.)

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