Ukraine deems 19.5% tax rate appropriate for crypto incomes

September 07, 2018
Chris Wheal

Ukrainian investors should regard the country’s regular 19.5% income tax rate as applying to their profits from crypto-related activities like trading and mining in the absence of specific regulation an official from the Finance Ministry in Kiev has suggested.

The issue of how much crypto investors owe the state is being debated in many countries, with authorities often quick to tap into their incomes and profits before having regulated the space and legalised digital assets. This is often the case even in countries where recognition of cryptocurrencies as legitimate has either been withheld ore refused.

Crypto investors in Ukraine have the options of reporting their crypto incomes either as property or financial assets and deputy finance minister Sergey Verlanov (left), who took up the post in late July, claims that the taxation issue is far simpler than many believe.

In an interview with Ekonomicheskaya Pravda, Verlanov explains: “Two types of operations are possible with cryptocurrency – mining and trading. So, let’s say we bought bitcoin for 1,000 hryvnias [US$35]; then we were lucky and it went up to 2,000 hryvnias; then we left bitcoin and credited the funds to a bank card. The change is 1,000 hryvnias.

“We impose income tax on it, the rate is 19.5% – whether this is a lot or a little, is a rhetorical question.”

Like World of Tanks

Verlanov suggests that while cryptocurrency has no legal status in the country, it is a common item, subject to turnover. “Under the Civil Code of Ukraine, this is an intangible property.” Trading bitcoins, he adds, is like buying and selling tanks in the popular online game World of Tanks.

Nevertheless, the deputy-finance minister believes that Ukraine should determine the legal status of cryptocurrencies and once established, crypto exchanges should act like tax agents. If the cryptocurrency is bought on an exchange, the law should oblige traders to declare their income and indicate its source.

In the interview, Verlanov notes that Ukrainian taxpayers have two options when reporting their crypto incomes. “We already have deputies who have submitted electronic declarations and reported their crypto assets. Some declared them in the ‘property’ section, others in the ‘financial assets’ section. Both interpretations can be used since cryptocurrency does not have a legal status yet.” Without it, he says it would be impossible to implement proper taxation and exert adequate control over cryptocurrency transactions.

Lack of clarity

Despite the increasing popularity of cryptocurrencies, many areas of their regulation in Ukraine are still unclear, despite three bills being filed since October in its parliament the Verkhovna Rada.

A fourth draft, expected later this month, addresses cryptocurrency taxation. Its authors propose the introduction of a temporary tax regime in the sector until 2025, with 5% tax on profits from cryptocurrency trading and mining as well as tax exemptions for crypto-to-crypto transactions and purchases of goods and services with coins.

Last month the Financial Stability Council of Ukraine approved a regulatory concept for crypto-related activities. The body includes representatives of the National Bank of Ukraine (NBU), the Ministry of Finance, the Deposit Guarantee Fund, the National Securities and Stock Market Commission (NSSMC), and the National Financial Services Market Commission.

Verlanov believes that of these the NSSMC and the NBU are best positioned to take responsibility for the oversight of cryptocurrency activities.


Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

Related News

OL DEX is closing all activities April 25, 2020
USDT (ERC-20) Gateway Enabled April 17, 2020