Legality of mining in Russia in 2024

Registration of IE

In 2018, the Ministry of Finance provided clarifications. The regulator’s letter reported that the term “cryptocurrency mining” is not mentioned in any regulatory act of the Russian Federation. Also, the rights and obligations of users performing transactions with coins and tokens are not established. The legality of mining in Russia in 2024 is still not established. Also, the issue of paying taxes for businesses mining digital assets remains open. Despite the lack of special norms, users who earn from mining bitcoin and altcoins are obliged to pay taxes.

The norms of the Civil Code of the Russian Federation should also be taken into account. The law defines the key attributes of entrepreneurial activity – regular profit generation from the use of one’s property, sale of goods, as well as under contracts for contracting and rendering services. Thus, it is obvious that persons who are engaged in mining bitcoins and altcoins must register their business legally. Taxes will also have to be paid as an entrepreneur.

It is not difficult to register a business for an individual in the Russian Federation. Many banks provide free assistance and help to submit documents for registration as an individual entrepreneur. To do this, you will need to provide a passport of a citizen of the Russian Federation and a certificate of TIN (individual taxpayer number). For foreigners, the registration procedure will be different.

Registration of self-employed status

To determine whether it is possible to engage in mining for persons who pay tax on professional income, it is necessary to consider two sides of this activity:

• Extraction of cryptocurrencies. The law does not prohibit obtaining coins with the help of special equipment. However, in most cases, users mine bitcoin and altcoins to then resell them on the crypto market.
• Realization of digital assets. The self-employed cannot engage in the resale of goods, it is prohibited by law. And virtual assets are considered as property and are regarded as a subject of trade. Nevertheless, in practice, miners are easily registered as payers of tax on professional income and carry out activities in the direction of “remote work through electronic platforms with cryptocurrencies”. It is understood that digital coins mined by farms cannot be resold, as they were not previously bought, but obtained through production.

Self-employment can be formalized in 2 ways:

• Through a bank (e.g. Sberbank Online or others).
• Through the mobile application “My Tax” (you will have to link the card, there you can also track the dynamics of the movement of funds).

It is important to remember that for the self-employed there is an annual limit on income – 2.5 million rubles. If a miner earns more, it will be necessary to register a sole proprietorship or connect another self-employed person.

Taxes

It does not matter whether mining is banned or permitted in Russia. Everyone who receives income on the territory of this state must make payments in its favor. The obligation to pay taxes exists regardless of the status of the subject of commercial activity, but the amount of mandatory contributions is directly related to it:

• A citizen is obliged to pay personal income tax on profits from cryptocurrency. The amount of personal income tax is 13%. However, here you need to remember that mining cryptocurrencies without registration can be recognized as illegal entrepreneurship and bring the user to criminal responsibility.
• Miner-entrepreneurs can consider for themselves a simplified taxation system (USN) with a rate of 6%. Insurance premiums will be added to these payments (for 2021, a one-time payment was in the range of 39-40 thousand rubles). If you choose the simplified taxation system “Income minus expenses” at 15%, you will have to show the tax authorities your energy costs. In this case, it will be necessary to connect the equipment to the power grid and draw up a contract for a sole proprietorship.
• The self-employed pay a fixed tax rate of 4% if income is received from individuals, and 6% if from legal entities. There is no need to keep complicated accounting and tax records. It is enough to link the bank card to which the funds are received to the self-employed person’s profile and indicate the source of their income at the time of receipt. Tax will be charged and deducted automatically every month.

Declaration of income

To pay taxes on profits received from mining bitcoins or altcoins, it is not necessary to find out whether it is legal to mine cryptocurrency in Russia. Reporting on the funds earned from mining is required for all individuals (3-NDFL) and businesses (individual entrepreneurs, companies). Self-employed persons are not required to declare their income.

All IEs, including those engaged in the mining of digital assets, are required to submit a declaration of money received for 2021 to the Inspectorate of the Federal Tax Service by May 4, 2022. The deadline for making mandatory payments is July 15, 2022.

Penalties and liability

Despite the fact that there is no direct ban on mining in Russia, users who report income from cryptocurrency mining late risk receiving a demand for payment of fines and other monetary penalties for late payment of mandatory payments and submission of declarations. Therefore, it makes sense to keep track of the deadlines for submitting documents and payments. There is no law on mining in the Russian Federation. However, the norms of other branches of law provide for the following penalties for unlawful behavior in the sphere of entrepreneurship.

It should be remembered that the tax authorities will be able to easily calculate if the income coming from mining is illegal. For example, they have the right to check with what money the miner used to make valuable purchases (car, apartment) or large cash deposits to investment accounts. Information about this is automatically reflected in the tax office. In this case, you will have to confirm your official income.

Other proposals of the Russian government

By the middle of the 2nd quarter of 2022, the issues of cryptocurrency mining in Russia have not been clarified at the legislative level. However, there were several proposals from government agencies regarding the legal regulation of coins and tokens. In particular, Russian Prosecutor General Igor Krasnov suggested including offenses involving cryptocurrencies in the Russian criminal code and suggested applying restrictive measures to digital assets. He noted that if Russian users are banned from using digital assets, the latter will not be able to be the subjects of criminal offenses.

Earlier, in early 2022, the Bank of Russia had already proposed to ban bitcoin and altcoins in the Russian Federation because of the risks they bring to the country’s economy and financial system. However, the Ministry of Finance advocated for Russian citizens to use cryptocurrencies legally, and the government took all measures to regulate the market.

The future of mining in Russia

In April 2022, regulators in the Russian Federation still have not reached a consensus on mining bitcoins and other cryptocurrencies. There were formed 2 camps with clearly defined positions.

The first, represented by the head of the State Duma Committee on Financial Markets, Anatoly Aksakov, proposes to include mining in the All-Russian Classifier of Economic Activities. According to the figure, it will be possible to tax this type of activity, and manners will be able to receive electricity at prices for industrial enterprises. Aksakov also believes that only companies should mine bitcoin and altcoins. This will allow for better regulation of the market. In addition, virtual assets should be mined in entities with minimal demand for electricity. The Ministry of Energy proposed to deal with the distribution of territories for mining farms through regional, not federal authorities. Also the regulation of coins and tokens is supported by the Ministry of Finance of Russia.

The second camp, joined by the Central Bank and the Prosecutor’s Office of the Russian Federation, opposes the legalization of cryptocurrencies and mining, citing the fact that digital assets are detrimental to the country’s economy and the well-being of society.

In April 2022, it is possible to engage in mining in Russia. However, cryptocurrency mining activities will remain unregulated until government authorities find a compromise. Obviously, the legal framework is already beginning to take shape, but how long it will take to strengthen a unified position on digital assets and virtual coin mining among all executive bodies is not yet clear.

Summary

Despite the fact that there are no special norms in Russian legislation to regulate cryptocurrency mining activities, entrepreneurs who earn income from mining are obliged to obey the general rules established by the civil, tax and criminal codes. Despite this, state authorities need to take a clear position on cryptocurrency mining and define the legal status of persons who are engaged in mining. This will allow entrepreneurs to legally conduct such a business in Russia, pay taxes and officially conclude contracts for electricity supply.

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