How to legally use cryptocurrency in Russia?

Since January 1, 2021, cryptocurrency has been legally recognized as property in Russia. This was made possible by the Law on Financial Digital Assets. Russians can now officially declare their cryptocurrency income, according to RBC Crypto.

New rules also introduce taxation on profits from digital assets. Lawyers have explained how to use cryptocurrencies in Russia without violating the law.

Since cryptocurrency is now considered property, it is subject to personal income tax (PIT). However, there is no need to pay tax on every purchase/sale of digital assets, as tax deductions are made at the end of the financial year, explained Yuri Brisov, member of the Commission on Legal Support for the Digital Economy of the Moscow Branch of the Association of Russian Lawyers. Cryptocurrency transactions worth 600,000 rubles or more must be declared even if there is no income.

“For example, if you buy one bitcoin at $50,000 and the coin subsequently drops to $40,000, there is no taxable income, but you will still have to report the transaction to the tax authorities, otherwise you will be fined,” the lawyer added.

According to the law “On Financial Digital Assets,” accepting cryptocurrency as consideration for goods, work, and services is prohibited. In other words, selling anything for digital coins is prohibited, explained Dmitry Kirillov, a teacher at Moscow Digital School.

According to the expert, purchasing something with cryptocurrency is not prohibited by law. Furthermore, in each such transaction, the specific location of the transaction will be investigated, added Dmitry Kirillov. For example, if a Russian citizen pays for a Time magazine subscription with cryptocurrency, the transaction would be legal for both parties, since digital assets are not prohibited as a means of payment in the United States (under whose tax jurisdiction the publication is located), the lawyer noted.

Despite the ban on selling goods and services for cryptocurrency, the Law on Financial Digital Assets does not provide for penalties for this offense, notes Dmitry Kirillov. He adds that bills proposing administrative and even criminal penalties for such offenses are currently under development.

According to Yuri Brisov, accepting cryptocurrency as payment may fall under Articles 172 of the Russian Criminal Code (illegal banking activity) and Article 199 of the Russian Criminal Code (tax evasion). The lawyer also notes that in some cases, using an illegal means of payment may result in charges under Article 159 of the Russian Criminal Code (fraud).