Kyiv: Ukraine’s securities regulator has proposed applying the country’s full personal income and military taxes to crypto gains, totaling 23%.
According to Azeri-Press News Agency, Ukraine’s Securities and Exchange Commission has put forward a plan to impose a 23% tax on individual income from crypto operations. This proposed tax is composed of an 18% personal income tax and a 5% military levy.
In a detailed 32-page consultation paper, the agency highlighted that taxation of personal income from crypto transactions is ‘one of the most complex aspects’ in constructing a tax system for digital assets. The challenge primarily arises from the anonymous and decentralized characteristics of cryptocurrency operations. Transactions are often conducted through decentralized platforms or self-hosted wallets, making automatic tracking by tax authorities difficult. Moreover, the responsibility for income reporting lies with individuals rather than intermediaries.
The commission noted the difference between virtual assets and traditional income sources like salaries and dividends, where a tax agent, such as an employer or bank, typically fulfills tax obligations. In the crypto realm, individuals are mostly responsible for this duty. Another complication is the difficulty in proving acquisition costs for tokens, especially when obtained through peer-to-peer exchanges, airdrops, or mining activities.
The regulator also addressed the issue of fluctuating crypto prices, which can complicate tax obligations. Rapid price changes can create scenarios where individuals are required to pay taxes on ‘paper profits’ that might vanish due to market downturns. Furthermore, the commission acknowledged that many users may be unaware of their tax liabilities. To address these challenges, the document advocated for simplified reporting models, fiat-exit taxation, and the development of digital tools to assist individuals in fulfilling their tax obligations.