In late July, Binance, the leading international exchange and blockchain ecosystem, announced the launch of a service to help pay taxes on cryptocurrencies.
This tool, called the Binance Tax Reporting Tool API, can help exchange users generate reports for filing with the tax authorities that reflect the movement of digital assets on the marketplace, as well as obtain transaction history for more than one financial year.
How does the Tax Reporting service work?
The Tax Reporting Tool service works only when integrating with third-party tax payment services, for example, Koinly, BearTax, etc. The user can integrate with a third-party service exclusively on his own. The Binance website contains detailed instructions in Russian.
Binance does not endorse any specific third party tax payment software. There are currently no analogues of third-party services with which the API of the Tax Reporting service can be integrated in the Russian Federation due to insufficient clarity in taxation issues in this area.
It is important to note that in accordance with the current legislation of the Russian Federation, the Binance group of companies is not obliged to disclose information to the Russian tax and law enforcement authorities. An exception may be justified individual requests from authorized bodies, mainly within the framework of a specific criminal case.
Current status of cryptocurrency regulation in Russia
Federal Law of July 31, 2020 N 259-FZ “On digital financial assets, digital currency and on amendments to certain legislative acts of the Russian Federation” (“Federal Law on CFA”) entered into force on 01.01.2021 (with the exception of some provisions, listed in article 27 of the law, which come into force later).
Previously adopted by-laws and court practice, which developed before, are applicable insofar as they do not contradict the norms of this law.
The Federal Law on CFA is a special act and takes precedence over the general norms of legislation regulating similar and similar relations and circumstances.
Three acts were adopted, affecting the application of blockchain technology in the financial field. The Federal Law on CFA will be applied in conjunction with the Federal Law of 18.03.2019 No. 34-FZ “On Amendments to Parts One, Two and Article 1124 of Part Three of the Civil Code of the Russian Federation” that has already entered into force (gives the concept of digital rights, referring them to “other property “(Art. 141.1 of the Civil Code of the Russian Federation) and smart contracts, allows the conclusion of transactions in digital form) and Federal Law dated 02.08.2019 No. 259-FZ” On attracting investments using investment platforms and on amendments to certain legislative acts of the Russian Federation ” (“Federal Law on crowdfunding”).
Legal aspects of taxation of cryptocurrencies
The draft Federal Law on taxation of cryptocurrencies passed the first reading in the State Duma (Bill No. 1065710-7 On Amendments to Parts 1 and 2 of the Tax Code of the Russian Federation), but at the moment there is no procedure for declaring and calculating the market value of digital assets .
Digital asset owners have the right to file a tax return and make tax payments, although the procedure is not yet transparent.
The tax is payable when income from the sale of property (“digital currency”) arises, primarily in fiat currency. Determining the amount of income without selling for fiat, and in the form of an exchange for cryptocurrencies, tokens, is difficult. There is a risk that the tax authorities do not recognize the cost of cryptocurrencies, the calculation of the declarant’s rates.
Even more difficult will be the situation in which you need to reduce the profit on the costs incurred to buy digital property. A decrease in profits carries a great risk for the taxpayer: the tax authorities will seek not to recognize any expenses that are not documented .
Any documents must contain the date, the amount of the transaction, come from a specific person. Electronic form is possible, but not always. Translation into Russian (certified) is required for any document.
Account statements, Binance wallets can be recognized or rejected by the tax office: the practice is just beginning to emerge. The Ministry of Finance has not yet confirmed the possibility of providing extracts from foreign crypto-exchanges to confirm expenses. It is necessary to be guided by the general provisions of the legislation.
We remind you that the draft law on taxation of cryptocurrency in Russia will be considered in the fall of 2021, similar to the draft law in Ukraine. We will promptly inform you about all legislative initiatives, follow the news.