Putin signs law recognizing digital assets, allowing their use in international trade

Russia legalizes digital assets with specific tax laws, allowing the use of cryptocurrencies in international trade payments and exempting mining activities from VAT.

New legal framework for digital assets in Russia

According to a report from the local news agency TASS, President Vladimir Putin has signed a law recognizing digital assets as a legal type of property, and adjusting tax regulations for this new type of asset.

The newly issued legal framework includes the following prominent provisions in the field of digital assets:

Digital assets are recognized as property, including cryptocurrencies used for international trade transactions within the framework of the experimental legal regime (EPR) in the field of digital innovation.

• Mining and selling of cryptocurrencies will be exempt from value added tax (VAT).
• Services of entities providing transactions within the EPR framework will also be exempt from taxation.
• Mining infrastructure operators must provide tax authorities with information about those who use their services to issue cryptocurrencies. Failure to provide information on time may result in a fine of 40,000 rubles (approximately $371).

Personal income tax and corporate tax regulations

- Regarding personal income tax: Cryptocurrencies obtained from mining will be considered income in kind. The value of the cryptocurrency will be determined based on the market price. This income will be taxed according to the usual progressive tax scale, while tax deductions based on mining costs will be allowed.

- Income from the purchase, sale or trading of digital assets: Will be taxed according to a two-tier tax scale:

• 13% for income below 2.4 million rubles (approximately $22,261).
• 15% for income exceeding 2.4 million rubles.

These incomes will be included in the same tax base as income from securities trading, bank deposits and other sources.

- Corporate income tax: Cryptocurrency mining will be taxed at the standard rate of 25% from 2025.

Restrictions on certain tax regimes

The new law on digital assets also introduces some restrictions on the tax regime, including:

Organizations/individuals, mining and selling cryptocurrency: Not allowed to transfer to agricultural tax. Will be required to use the simplified tax system, or the special tax regime "Automated simplified tax system".

Patent system and self-employment regime: Not applicable to cryptocurrency mining and trading.

The date of entry into force of the law has not been announced, we need to wait for an official announcement from the Russian Government.

Russia accelerates progress in "legalizing" crypto

Before President Vladimir Putin signed the law recognizing cryptocurrencies as property, the head of Russia also passed the crypto mining law in August 2024. Previously, the Governor of the Central Bank of Russia, Ms. Elvira Nabiullina, also announced plans to deploy an international payment system using crypto in 2024.

According to many sources, when the law on the use of crypto is passed, cryptocurrencies will be regulated similarly to foreign currencies in Russia. In particular, the Central Bank of Russia will be the agency managing issues related to cryptocurrencies; the Federal Financial Supervision Service, the Federal Tax Service, the Federal Security Service and the Federal Asset Management Agency will have the role of controlling revenue.

The move to legalize the use of crypto in the country has been "rushed" by Russia since 2022, in order to "avoid" sanctions from the US and Western countries related to the war in Ukraine, which has put pressure on the country's payment system.

The Russian government then continuously "opened the door" to cryptocurrencies from 2023 when supporting organizations to test crypto payments, establishing an international payment system based on blockchain, passing a bill on the digital ruble (CBDC)