No more VAT on bitcoin and cryptocurrency? Russia wants to promote digital economy

The Russian Duma has approved a bill to stop charging VAT on cryptocurrency. Lower-income tax rates will also be applied.

This is not charity for Russian citizens but part of a larger plan. Russia sees blockchain technology as a way to fight the economic isolation they find themselves in. Just about the entire world has imposed economic sanctions on Russia because of its invasion of Ukraine.

Less tax on crypto

Therefore, the Duma, the lower house of the Russian legislature, has passed a bill on how to tax cryptocurrency. A sale (with profit or loss) will be exempt from value-added tax, which we call VAT. According to Russian news service RIA Novosti, other services for exchanging digital assets will also be exempt.

In addition, the bill states that income tax rates will be set at:

• 13% for Russian exchanges on the first 5 million rubles (€88,400) of taxable base per year,
• 15% on amounts above that limit
• 15% across the board for currency traders

The current income tax rate is 20%.

Building the digital economy

The government notes in the bill that a separate tax procedure for digital assets is essential for creating an effective and competitive digital economy.

Russia has turned 180 degrees in its sceptical attitude towards cryptocurrency. Before the invasion of Ukraine, the Russian central bank was particularly critical of crypto and threatened to take steps. But President Putin whistled the central bank back, and that was before all the economic sanctions. As if Putin knew what was going to happen.

No more SWIFT and gold

At the moment, major Russian banks are blocked from the SWIFT system, which in practice means that international transactions are incredibly difficult for companies and ordinary people.

In addition, the G7 countries this week banned the purchase of newly mined or refined Russian gold.

Time for bitcoin?

No more gold and no more international transactions? One would almost think that Russia is being deliberately pushed into the corner of bitcoin by the rest of the world.

Meanwhile, Russia’s foreign reserves are also drying up, which means the country could not meet her foreign debt payments.

This is about $100 million in interest payments that the country should have paid to foreign investors on May 27. Even after the usual 30-day postponement, Russia was unable to comply.

A bitcoiner would recommend switching completely to bitcoin and using all the energy Russia has to mine, but it is never that simple.

Central bank wants its own digital currency

The Russian central bank is preparing to launch their own stablecoin.

Olga Skorobogatova, the vice-president of the Russian Central Bank, said last Thursday that the tests with a digital rouble will be brought forward. These were initially scheduled to take place in 2024 but are now scheduled for April 2023.

“I think all self-respecting states will have a national digital currency within three years. We need to be ready as soon as possible. Moreover, this solves the problem of blocking SWIFT because this integration will make SWIFT obsolete,” Skorobogatova said.