Crypto Tax Legislation & Law in Ukraine

No tax rules specifically related to crypto-assets have been introduced so far and so the general rules apply.

Currently, the Law of Ukraine “On Virtual Assets” dated 17 March 2022, No. 2074-IX (the “Virtual Assets Law”) is in place; it will become effective upon the adoption of amendments to the Tax Code of Ukraine on taxation of virtual assets. The relevant draft law amending the Tax Code 1  (the “draft tax rules”) is still under consideration by Parliament. In parallel, an alternative set of taxation rules is being developed in anticipation of adaptation of the national crypto framework with the EU’s MiCA Regulation. However it’s too early to report on their content as the relevant drafts are not publicly available yet. In addition, the current version of the Virtual Assets Law is being amended to align it with the EU’s MiCA Regulation as well. Once the Virtual Assets Law and the new tax rules are developed and effective, market participants would be able to use banking services, pay taxes on income and receive legal protection of their rights to virtual assets.

Currently, there is no methodology or guidance on how the tax should be calculated in operations with crypto-assets. In general, Ukrainian legal entities pay corporate profit tax at standard rate of 18% on profits calculated based on local GAAP or IRFS, while individuals pay income taxes on gross income – personal income tax (18% standard rate) and military tax (1.5% standard rate).

Corporate profit tax

Under the draft tax rules, companies should separately calculate the taxable result (gain or loss) on the sale of virtual assets in accordance with local GAAP or IRFS. There is no detailed methodology yet on how to calculate the gain under local GAAP.

Individual taxes

Under the draft tax rules, the gain realised by an individual on selling virtual currency will be taxed at preferential rates of 6.5% (5% personal income tax and 1.5% military tax). The gain is calculated on a cash basis for the whole calendar year, i.e. income will be the total cash proceeds received by an individual from crypto exchange or crypto buyers, and expenses will be all cash payments made by an individual to crypto exchanges or crypto sellers. Losses from selling virtual assets are carried forward to future tax years.

It is worth noting that the draft tax rules mentioned are based on the current version of the draft legislation submitted for the review of Parliament and do not account for the new tax concept which is being developed and is not publicly available yet.

Virtual assets are not a means of payment and cannot be exchanged for property, goods or services. Only exchange for cash or other virtual assets is possible.

There are no separate tax rules for the exchange of virtual assets, therefore gain or loss has to be calculated according to the local GAAP or IRFS.

There is no distinction between professional and non-professional activity in terms of crypto trade in Ukraine. Thus, the general tax regime applies.

At the same time, there is a general rule that if an individual performs activities which fall within the definition of entrepreneurship (i.e. systematic profit-oriented business activities performed at an individual’s own risk and volition), the individual should either register as a private entrepreneur or establish a business entity for the performance of the respective activities. In such a case, the respective tax regimes for entrepreneurs or companies shall apply.

According to the draft tax rules, accounting of operations with crypto-assets shall be done separately. Thus the only offset allowed is the offset of losses resulting from operations with crypto-assets from the balance of such operations, not from the general balance of all incomes and losses of a certain person/entity.

Corporate profit tax

Offset is derived from losses from operations on the sale of crypto-assets, which is calculated as the difference between the price for which a crypto-asset has been bought and the price for which it has been sold.

Individual taxes

Offset is derived from losses from all operations with crypto-assets, which are calculated as incomes minus expenses.

Other than that, the current legislation does not provide for any specific offsetting rules for crypto.

According to the draft law provisions allowing offset of losses in operations with crypto-assets (see Q5), there are no limits as to time frame to offset losses: they may be offset during any future tax period.

The legal nature of NFTs is yet to be regulated by Ukrainian legislation as neither the current version of the Virtual Assets Law nor the anticipated MICA-related amendments to it provide a clear legal framework for NFTs. Therefore, the tax implications of operations with NFTs are subject to future regulation.

Currently, any income received as a result of selling NFTs would likely be treated as “other income” for companies and individuals, taxed at standard rates.

There is no specific guidance in the current legislation nor in draft rules regarding the taxation of mining activity.

For companies, deduction of mining expenses while calculating tax gain appears possible under local GAAP and IFRS provided that such expenses are duly supported by accounting documents and there is a link of such expenses with income from the resale of mined virtual assets.

Individuals are only allowed to deduct expenses on cash purchases of virtual assets; mining expenses are unlikely to qualify as purchases and are therefore disallowed.

There is no regulation or guidance on the taxation of staking. Any income received as a result of staking would likely be treated as “other income” for companies and individuals, taxed at standard rather than preferential rates.

There are no specific rules regulating the above situations. Thus, they are subject to general tax rules.

In Ukraine, there are no specific documentation requirements for taxpayers holding virtual assets. Thus, such taxpayers must comply with the general rule requiring taxpayers to record their income and expenses only based on the primary (accounting) documents, which may include contracts, invoices, banking statements etc.

Also, under the draft tax rules, crypto-asset exchanges are not tax-withholding agents, but they are obliged to file reports to the tax authority specifying the amount of income paid to individual sellers of virtual assets. The seller will be under an obligation to report capital gains in their annual tax return and pay the tax.

Not at the moment.