Ukrainian news publication Ligamedia has reported this week that the country is looking to legalise cryptocurrency in the near future.
The news follows the legalisation of gambling in Ukraine, and it seems the state is trying to take control of all the previous grey areas of the economy.
The Ukrainian government is seeking to legalise cryptocurrency in order to receive income tax and make this sector of the economy transparent.
Cryptocurrencies became popular in the country several years ago, and interest in virtual money is showing consistent growth.
Due to the unstable economy in the country and the inflating national currency, Ukrainian citizens prefer to keep their savings in Bitcoin.
More and more cryptocurrency mining farms have begun to appear as well in an attempt to cash in on the growing sector.
The government of Ukraine understands that this area of the economy can bring money into the budget and so is attempting to bring in regulation and tax laws to receive their piece of the pie. But how will this affect Ukrainian taxpayers who may now need to tax their crypto earnings?
Will new cryptocurrency legislation impact taxpayers?
Compared to countries such as France and the UK, Ukraine is a very attractive country in terms of paying taxes. Individual income tax is only 18%.
However, the new legislation will only increase state control, as the new crypto tax will be regulated by the government of Ukraine.
This will also lead to a lack of anonymity, as the government will know how much cryptocurrency citizens have.
Even if Ukrainian citizens carry out their activities with cryptocurrency abroad, they will be required to pay taxes to the state treasury.
Cryptocurrency in Ukraine is not recognised as an official currency, and therefore many people think that buying and selling cryptocurrencies is not taxable.
At the moment, it is not clear how to pay taxes on the purchase of cryptocurrency, so while new legislation may clear this up, it remains to be seen whether citizens will follow the laws or claim ignorance.
Tax evasion in Ukraine
Due to the unstable political situation in Ukraine in recent years, the country has clamped down on tax evasion by large companies.
Companies may look for loopholes in legislation to pay less taxes to the state treasury.
Cryptocurrency is no exception, and so the state needs legalisation and recognition of cryptocurrency as an official currency in the first place.
Ukraine is actively striving to become a member of the European Union, but the economic and political situation in the country currently does not meet the entry requirements.
The European Union often accuses Ukraine of failure to effectively deal with tax violations, and so the introduction of new crypto tax legislation will help Ukraine improve the situation with the European Union and add more money to the state budget.
The benefits of legislation
With the new legislation, it will be possible to withdraw savings and buy and sell cryptocurrency safely, and cryptocurrencies will be viewed as a viable investment option.
Companies will also be able to work with other market participants around the world and benefit from new developments.
Legislation should also see the emergence of new companies and job opportunities, while cryptocurrency mining will be seen as an entrepreneurial activity.
For Ukrainian taxpayers, the legalisation of cryptocurrency is an additional bureaucratic pressure.
At the same time, this is good news, because the sector will be transparent and will not have to be afraid of fines and sanctions by the state if taxpayers comply with the new legislation.
In any case, the bill on the taxation of cryptocurrencies still requires significant improvements before it becomes law. It is assumed that from January 1 2024, cryptocurrency-related profits will be taxed at 18% at the base rate.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.