Ukraine Scraps Tax Breaks for Cryptocurrency Transactions
Date: 2024-02-18 Author: Dima Zakharov Categories: IN WORLD
Ukraine's Stance on Cryptocurrency Taxation
The Ukrainian Parliament, known as the Verkhovna Rada, has made a significant decision regarding the taxation of cryptocurrency transactions. The proposal for preferential tax treatment on operations involving digital assets has been dismissed, as revealed in an interview with the head of the parliamentary committee on financial, tax, and customs policies, Daniil Hetmantsev.
Avoiding Speculative Crypto Activities
Hetmantsev explained that the decision stems from the desire not to incentivize crypto activities that are inherently speculative and do not generate added value or employment opportunities. The National Securities and Stock Market Commission of Ukraine (NSSMC) failed to develop a robust legislative proposal concerning virtual assets. Consequently, discussions within the committee are revolving around an alternative draft put forth by the "Servant of the People" party's deputy, Alexander Sova.
Key Unresolved Issues
Two primary issues remain unresolved: taxation and market regulation. Hetmantsev emphasized his support for taxing virtual assets in line with profits from securities. He highlighted the International Monetary Fund's (IMF) stance, indicating a unified tax rate for investment profits.
Challenges in Regulation
Hetmantsev elaborated on the challenges in regulatory bodies, suggesting that while the NSSMC is closer to the subject matter, its institutional capacity remains inadequate. On the other hand, the Ministry of Digital Transformation (MinCifra), proposed as a regulator, is more efficient but less suited to cryptocurrency market regulation.
Deliberate Approach
The Ukrainian legislative body is proceeding cautiously with the enactment of legislation regarding virtual assets. They are convinced of the necessity to adopt successful practices from other countries. This deliberative process reflects the complexity and evolving nature of cryptocurrency regulation in Ukraine.
Upcoming Legislation
In November 2023, the Verkhovna Rada received a draft legislation on taxing cryptocurrency operations from the NSSMC, proposing an 18% tax rate. However, this proposition faced public backlash. Subsequently, the Ministry of Digital Transformation registered an alternative bill in November, suggesting tax rates of 5% for the first three years, 9% for the subsequent five years, and 18% thereafter.
Future Prospects
Nardep Alexey Zhmerenetskiy announced the imminent introduction of new versions of the "Virtual Assets" law and cryptocurrency taxation documents within six months in Ukraine. The evolving legislative landscape indicates a concerted effort to strike a balance between fostering innovation and ensuring financial stability in the cryptocurrency sector.
