Cryptocurrency Taxation: the Draft Law

On 14.06.2023, the National Commission on Securities and Stock Market (NCSSM) presented the text of the draft law “On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine on regulating the turnover of virtual assets in Ukraine” to representatives of specialized state bodies.

The draft is based on the MiCA EU Regulation, which will be implemented in Ukrainian legislation. In general, the draft law will define the mechanism of legal regulation of crypto-assets, the scope of legal obligations for market participants, the concept of taxation, as well as the issue of protecting the rights of investors against fraud and other illegal actions in the market.

It is expected that in the event of the approval of the draft law by the Verkhovna Rada, the updated legislation on virtual assets will provide the following:

• the National Bank of Ukraine and NCSSM will act as regulators of the crypto-assets market;
• virtual assets will be classified into three categories: electronic money tokens, tokens tied to assets, other virtual assets;
• for the public offering (issuance) of tokens tied to assets at auctions, the issuer as a legal entity must be duly authorized by the NCSSM.

Authorization will require the issuance of a white paper by the issuer (i. e. submission by the issuer of information about the company, a description of the business model, policies, as well as a conclusion that its virtual assets are not electronic money tokens).

The cryptocurrency tax rate

It is planned that income from transactions with virtual assets will be subject to personal income tax at the rate of 18% and military levy at the rate of 1.5%. The condition of taxation will be a positive value of the total financial result of operations with virtual assets, as well as the stay of virtual assets, acquired as a result of such operations, in the ownership of the payer for up to 365 days.

As noted by the Chairman of the NCSSM, Mr. Ruslan Magomedov, the draft law is currently expected to be finalized, afterward it will be submitted to the relevant parliamentary committee.

Let us please remind you that on 20.04.2023 the European Parliament approved the first general rules for regulating and protecting the rights of consumers regarding cryptocurrencies – Markets in Crypto-Assets (MiCA). The Regulation will enter into force in the EU on 29.06.2023, and will be fully in effect from 30.12.2024.

MiCA is a document that provides for the regulation of virtual assets in the EU, protecting users and investors in this field.