Ukraine has faced a lot of political and economical development in the past years, which can also be noticed in the country's sentiment towards crypto-related issues. According to the current legal situation, the only officially acknowledged form of money is the national currency, the hryvnia, and foreign currencies issued by a central authority. However, the government is working on a regulatory framework for virtual currencies and has already proposed two drafts.
The Legal Status of Cryptocurrencies in Ukraine
Currently, there is no official regulatory framework for virtual currencies in Ukraine and they have not yet determined their official status. Two drafts have already been proposed regarding legal treatment and regulations, which will be discussed in the following paragraph.
As of now, none of the published drafts have been accepted, which means that any crypto-related activities are subject to standard income taxation. In Ukraine, taxable income is defined as "a positive difference between the revenue received from the sale of the asset and its value" and this also includes any profit made from using Bitcoin and Co.
- For individuals, this indicates that any income received in the form of cryptocurrency is subject to a tax of 18%.
- For any legal entities the tax rates can differ a lot depending on their exact form of business.
On the other hand, crypto-to-crypto transactions are currently not taxed at all, even if profit is made.
The Proposed Drafts for Regulation and Taxation of Cryptocurrencies in Ukraine
In late 2018 the Ukrainian parliament published their first draft on regulation and taxation of cryptocurrency related transactions.
The draft says that "crypto-currency is a program code [...] which can be used as a barter, information about which is deposited and stored in the block system in the accounting units of the current block-system [...]."
An aspect that makes Ukraine specifically interesting for entities dealing with virtual currencies is that the proposed draft would reduce the tax on profits made through crypto-transactions to a flat rate of 5% until 2024. Afterwards, individuals are meant to stay subject to the 5% rate, but legal entities would face the regular rate of 18% corporate income tax on any crypto-based profits. Also, the tax base would only arise when withdrawing crypto to fiat, meaning that crypto-to-crypto activities remain tax-exempt.
The parliament also proposed a general legal framework of how cryptocurrencies will be treated. The main goals are the following:
- address the legal uncertainty of dealing with cryptocurrencies
- protect consumer rights
- create a foundation for state supervision and taxation
However, the opposing political party set up an alternative draft, which asks for all crypto-related transactions to be tax-exempt until 2030. This almost sounds too good to be true and only time will tell how exactly the Ukrainian government will put its plans into practice.
Just like in most countries right now, Ukraine is also busy setting up rules and regulations, as there is definitely a lot of interest in virtual currencies. Even the Ukrainian National Bank has considered launching its own virtual currency, the e-hryvnia, in order to reduce costs of transactions.
The government of Ukraine aims to come up with a set of regulations, but they have not made yet an official statement on which proposed bill they will pick and when exactly it will go into effect. There are also plans to monitor the market and set guidelines regarding KYC and AML regulations. At the same time, some experts argue that too much regulation could make Ukraine less interesting for crypto-related activities.
A task force is currently working on a set of regulations that will find a good balance between both standpoints. After all, they aim for a framework that allows the Ukrainian market to grow and attract crypto businesses on a global scale.
Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations we recommend contacting a certified legal advisor in the specific country. As this blog post refers to international crypto laws, the content will only be available in English. If any questions occur, feel free to contact us in our social media channels.