New law on the taxation of digital financial assets

18 July 2022
Tax Messenger
Federal Law No. 324-FZ "On Amendments to Part Two of the Tax Code of the Russian Federation"[1] ("the Law"), passed on 14 July 2022, establishes special provisions regarding the VAT, profits tax and personal income tax treatment of transactions involving digital financial assets (DFAs), utility digital rights (UDRs) and hybrid instruments.
Summary of key changes

  • Sales of DFAs in Russia are not subject to VAT.
  • The Law establishes types of services of information system operators, DFA exchange operators and investment platform operators that are likewise exempt from VAT when supplied in Russia.
  • A new article is introduced which lays down specific provisions regarding the determination of the tax base arising from transactions involving DFAs and (or) digital rights incorporating both DFAs and UDRs. In particular, it establishes a list of types of income and expenses associated with such transactions, the procedure for determining the market value of DFAs, and so on. Personal income tax is charged on the financial result of transactions involving DFAs and (or) digital rights (i.e., income minus expenses).
  • The Law establishes a list of tax agents responsible for withholding personal income tax on income received by a taxpayer from transactions involving DFAs and (or) digital rights.
  • With regard to profits tax, the Law establishes that the tax base arising from transactions involving DFAs and (or) digital rights is to be determined on an aggregate basis with transactions involving non-traded securities and non-traded derivatives (except in cases specified by the Law).
  • A requirement is introduced for an information system operator[2] to submit information on transactions involving the alienation of DFAs and (or) digital rights to the tax authorities.
What action is advised?

The introduction of tax regulation for new instruments of the digital economy makes it essential to analyse in detail the rules governing the taxation of transactions involving such instruments and to evaluate the effectiveness of their possible use in business processes.

How can B1 help?

The B1 team is ready to support companies in analysing the regulations governing DFA transactions, modelling the tax implications of incorporating DFAs into business processes, and liaising with the appropriate competent authorities.

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