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Taxation of income received from transactions with virtual assets

13/ 07/ 2022
  Author: Alina Shulika, attorney at Dynasty Law & Investment With the entry into force of the Law On Virtual Assets dated February 17, 2022 No. 2074-IX, virtual assets and business in this area will be legalized for the first time in Ukraine. In addition, this Law will not only regulate the legal regulation of the market of virtual assets and its participants, determine their legal status and establish state control over the market of virtual assets, but also, as a result, each owner of virtual assets will be given the opportunity to legally exchange and declaration. Currently, the market of virtual assets is actually already formed and has existed in Ukraine for more than one year. However, its full functioning, as well as its further development, is hindered by a number of unresolved problems, the most significant of which is the lack of mechanisms for taxation of income received from transactions with virtual assets. Current tax legislation still does not regulate the issue of taxation of income received from mining or trading operations. The Law On Virtual Assets will enter into force from the date of entry into force of the Law On Amendments to the Tax Legislation Regarding the Features of Taxation of Transactions with Virtual Assets, which in particular provides: - Exempt from VAT the transactions with virtual assets and services provided by service providers related to virtual assets. - Temporarily establish preferential taxation of investment income from: operations with virtual assets and services provided by providers of services related to virtual assets at the rate of income tax of 5%. operations with virtual assets for individuals at the personal income tax rate of 5%. At the same time, the term of temporary preferential taxation of investment income from operations with virtual assets and services provided by service providers related to virtual assets will be 5 years. And also, establish an obligation to pay a military levy on the amount of investment profit from operations with virtual assets for individuals at a rate of 1.5%.

Author: Alina Shulika, attorney at Dynasty Law & Investment

With the entry into force of the Law “On Virtual Assets” dated February 17, 2022 No. 2074-IX, virtual assets and business in this area will be legalized for the first time in Ukraine.

In addition, this Law will not only regulate the legal regulation of the market of virtual assets and its participants, determine their legal status and establish state control over the market of virtual assets, but also, as a result, each owner of virtual assets will be given the opportunity to legally exchange and declaration.

Currently, the market of virtual assets is actually already formed and has existed in Ukraine for more than one year. However, its full functioning, as well as its further development, is hindered by a number of unresolved problems, the most significant of which is the lack of mechanisms for taxation of income received from transactions with virtual assets. Current tax legislation still does not regulate the issue of taxation of income received from mining or trading operations.

The Law “On Virtual Assets” will enter into force from the date of entry into force of the Law “On Amendments to the Tax Legislation Regarding the Features of Taxation of Transactions with Virtual Assets”, which in particular provides:

– Exempt from VAT the transactions with virtual assets and services provided by service providers related to virtual assets.

– Temporarily establish preferential taxation of investment income from:

  • operations with virtual assets and services provided by providers of services related to virtual assets at the rate of income tax of 5%.
  • operations with virtual assets for individuals at the personal income tax rate of 5%.

At the same time, the term of temporary preferential taxation of investment income from operations with virtual assets and services provided by service providers related to virtual assets will be 5 years.

And also, establish an obligation to pay a military levy on the amount of investment profit from operations with virtual assets for individuals at a rate of 1.5%.

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