Bill Proposes Tax Holiday for Cryptocurrency Businesses in Ukraine
A draft bill introducing tax breaks for entrepreneurs and companies dealing with cryptocurrencies has been filed in Ukraine’s parliament, the Verkhovna Rada. The authors of the bill have called for tax exemptions for entities working in the sector until the end of 2029.
New Legal Terms
Ukrainian lawmaker Yuri Derevyanko, one of the leaders of the Movement of New Forces party, put forward the new proposal to relieve cryptocurrency businesses from taxation for at least a decade. Bill 9083-1 has advanced through a number of important parliamentary committees this month, including those responsible for budgetary matters, financial policies, customs regulations and European integration.
If adopted, the proposed legislation would result in amendments to the Ukrainian tax code. It would provide tax breaks on income earned from all cryptocurrency transactions. Both corporate entities and private individuals dealing in cryptocurrencies would be able to benefit from the tax moratorium until Dec. 31, 2029. The import and sale of equipment designed solely for mining would also be exempted from VAT.
In addition, the bill introduces a number of new legal terms pertaining to virtual assets and blockchain technologies. Cryptocurrencies have been defined as intangible digital assets, the right to possession of which is recorded in distributed ledgers. The draft law describes cryptocurrency mining as data processing related to the maintenance of distributed ledgers, which is then rewarded with digital assets.
Derevyanko believes that the 0 percent tax rate will stimulate the development of the cryptocurrency market in Ukraine and open the door for new investments. He said this will create conditions for the cryptocurrency industry to become a critical element of the country’s economy. “I think that it is necessary to introduce a 10-year tax moratorium in the crypto space. We must streamline and legalize this huge sector, which will be the engine of the new economy,” he said, as quoted by Ukrainian and Russian media.
Many Proposals, No Decisions
The bill was announced as an alternative to another draft presented by Derevyanko’s colleague, Alexei Mushak, a member of President Petro Poroshenko’s “Solidarity” party. Bill 9083, which was introduced in September, is also aimed at amending the Ukrainian tax code to provide tax breaks for the crypto industry. According to that proposal, profits from transactions related to cryptocurrencies and other digital assets would be subject to a preferential tax rate of 5 percent until the end of 2023. Starting from Jan. 1, 2024, individuals and businesses would be required to pay an 18 percent tax rate on their income from such deals.
Despite multiple legislative proposals, as well as calls from government officials and representatives of the industry, Ukraine’s cryptocurrency market remains largely unregulated. Three bills dealing with key regulatory challenges have been filed in parliament since last October, but no real progress has been made toward their adoption, at least that has been reported thus far. In August 2018, the Verkhovna Rada said that legislation recognizing cryptocurrencies as financial assets would be adopted at some point this year, or by 2019 at the latest. In the absence of clear guidelines regarding taxation, a deputy finance minister recently advised Ukrainians to pay 19.5 percent income tax on profits from crypto transactions.
In July, Ukraine’s Financial Stability Council approved a new regulatory concept for the cryptocurrency sector. The members of the council — including representatives of the National Bank, the Ministry of Finance, the Deposit Guarantee Fund, the National Securities and Stock Market Commission, and the National Financial Services Market Commission — reaffirmed their willingness to work with lawmakers in the Rada to adopt a comprehensive legal framework that will ensure transparent relations between crypto investors, other stakeholders and the government in Kiev.