Currently, a new taxation model developed by the NCSMFR is being discussed, which proposes a rate of 23% for individual income. This rate consists of an 18% personal income tax and a 5% military levy.
This is reported by Business • Media
According to the new proposals, this rate is considered a “standard” model for all individual incomes, including the taxation of securities and deposits. It is particularly important that this model is also being considered for the virtual assets market, noted lawyer Petro Bylyk.
Preferential Rates and Taxation Features
The mentioned preferential rates of 5% or 9% may apply under certain conditions, particularly for individual entrepreneurs (IE) in designated groups or if the legislation provides for reduced rates for specific operations, such as dividends.
“This does not mean that a 5% or 9% rate will be applied to transactions with virtual assets. Rather, it raises the question of why not introduce a 5% or 9% rate for virtual assets,” says Bylyk.
Taxation Moment and Tax Base
An important feature of the new model is the moment of taxation, which is based on the exchange of a virtual asset for fiat currency. As explained by Hanna Voievodina, CEO of Manimama Law Firm, when you exchange Bitcoin for USDC, tax is not incurred, but upon further exchange of USDC for hryvnia in a bank account, the moment of income realization occurs.
“This opens up opportunities for tax planning: you can control exactly when to ‘convert to fiat’,” noted Voievodina.
The tax base for individuals is considered to be the positive difference between the income from the sale of crypto assets and the expenses for their acquisition. According to Lana Turobova, it is permissible to account for losses from previous periods when calculating the tax base.
Since the taxation model is based on net income, it is important to have evidence of expenses. If tokens were purchased through P2P or DEX, and there is no proof of value, tax will have to be paid on the full sale amount, not on the difference. For example, when buying token XYZ for $1000 and selling it for $1200, without purchase documents, tax will need to be paid on $1200.
With the implementation of the new tax regime, cryptocurrency users will need to carefully document their actions in the market, including accounting for all transactions, trading histories, and data on deposits and withdrawals.
Hanna Voievodina also noted that using non-custodial wallets, such as MetaMask or Ledger, may complicate the verification of the source of funds, which is significant from an AML and taxation perspective.
“When trying to transfer tokens from MetaMask to an exchange account for fiat sale, the bank or service provider may question the origin of the assets,” emphasized Voievodina.
The importance of documentary confirmation was also highlighted by Petro Bylyk, noting that maintaining records may require the involvement of an experienced accountant for accurate calculation of the tax base.
Additionally, the NCSMFR model discusses the possibility of avoiding disputes with tax authorities regarding the value of tokens received before the new legislation comes into effect, based on a fixed tax rate.
“It is being discussed that for a certain period after the law comes into force, individuals may align their virtual assets by paying a fixed tax rate,” summarized Bylyk.