Russian Tax Authorities Recommend Reporting Bitcoin Operations

News and Analysis

This May, Russia’s Federal Tax Service (FTS) received an internet request from a cryptocurrency user who asked it to clarify whether it’s necessary to provide reports on cryptocurrency buy/sell operations between residents and non-residents. The FTS’s response outlines some interesting issues in this grey legal zone.

In the very beginning of their response, the FTS’s specialists note that absence of any particular documents and information on a transaction’s details prevent them from giving a ‘sound answer to the question specified in the request’.

“Still, we deem it possible to note the following. According to sub-clause (b) of item 9 of Part 1 of Clause 1 of the Federal Law 107-FZ d.d. 12.10.2013 “On currency regulation and control” (hereinafter referred to as the Law 107-FZ), currency transactions include purchase of currency values, the currency of the Russian Federation, and internal securities used as a means of payment, by a resident from a non-resident, and transfer thereof from a resident to a non-resident,” the FTS’s response reads.

For that reason, the FTS classifies cryptocurrency buy/sell operations between residents and non-residents using currency values and/or Russian national currency as currency transactions. Therefore, the Tax Service notes, one has to provide reports in their regard.

“Pursuant to Part 7 of Clause 12 of the Law 173-FZ, resident natural persons are obliged to provide reports to tax authorities located at the place of their registration as to account moves through banks beyond the Russian Federation pursuant to the procedures established by the Decree of the Government of the Russian Federation No. 1365 dated 12.12.2015 (On the procedure of provision of reports on account moves beyond the Russian Federation by resident natural persons to tax authorities).”

According to the FTS, there is a classified list of currency transactions that resident natural persons may conduct through deposits or accounts in banks beyond Russia.

“Currency transactions, when the Law 173-FZ prohibits their conduction through deposits and accounts in foreign banks, have to be conducted through accounts in accredited banks.”

Thus, considering the provisions of the Russian Federation’s laws on currency, resident natural persons, according to the FTS, are obliged to report every currency operations involving accounts or deposits in banks beyond the Russian Federation.

Concluding the response, the Tax Service has noted that the letter “is not a regulatory legal instrument, does not entail any changes in legal regulations of currency relations, contains no provisions entailing legal consequences for indefinite number of people, is for information only, and does not prevent residents and non-residents from using provisions of the Russian Federation’s currency laws within the meaning different from provisions contained herein.”

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