Ukraine Proposes 23% Tax On Crypto Transactions

Ukraine’s National Securities and Stock Market Commission (NSSMC) has introduced a comprehensive framework for taxing cryptocurrency transactions, proposing a 23% tax rate that includes an 18% personal income tax and a 5% military levy. This proposal, unveiled on April 8, is Ukraine’s first structured approach to crypto taxation amidst ongoing economic challenges due to the war.

The framework specifies that only certain crypto activities will be subject to taxation. These include converting cryptocurrencies to traditional currency (fiat) or using them to purchase goods and services. However, crypto-to-crypto transactions will be exempt from taxation, aligning Ukraine with other European countries and Singapore. Additionally, stablecoins backed by foreign currencies may receive preferential treatment, potentially being fully exempt or subject to lower tax rates of 5% or 9%.

The NSSMC’s proposal also addresses various other crypto activities beyond simple trading. For mining, the framework suggests classifying it as a business activity for tax purposes, with possible tax-free thresholds for small-scale miners. Staking earnings could be treated as business income or only taxed when converted to fiat currency. Hard forks and airdrops present unique challenges, with options including taxing these as ordinary income or only when tokens are cashed out for traditional currency.

Ukraine’s approach to crypto taxation draws inspiration from jurisdictions with established crypto-friendly tax policies, such as Austria, France, Singapore, Malaysia, and Georgia. The framework includes provisions for social equity, such as tax-free thresholds for small investors and potential exemptions for cryptocurrency donations, transfers between family members, and long-term holders. However, these exceptions might not extend to users of non-custodial wallets.

The tax framework is part of Ukraine’s broader regulatory efforts to define oversight of the crypto industry. The National Bank of Ukraine is working on legislation expected to be completed by October 2025. This effort builds on the legal framework established in March 2022 by President Volodymyr Zelenskyy, which defined the regulated crypto market in Ukraine. The country’s approach aligns with European Union standards, as Ukraine has been an EU membership candidate since 2022 and is crafting its crypto regulations based on the EU’s Markets in Crypto Assets (MiCA) regulation.

By formalizing its crypto tax structure, Ukraine aims to prevent financial abuse while promoting the legal and responsible use of digital assets. Establishing fair and understandable taxation rules is also seen as a prerequisite for attracting investment and integrating the Ukrainian virtual asset market into the global financial market. The NSSMC has already presented draft legislation based on this framework to Ukraine’s parliamentary finance committee, marking a concrete step toward implementation.