Ukraine Proposes 18% Tax on Crypto-to-Fiat Transactions

Ukraine’s top financial regulator has proposed a new taxation scheme for cryptocurrency, treating it as personal income with potential exemptions for certain foreign asset-backed stablecoins. The National Securities and Stock Market Commission (NSSMC) of Ukraine introduced this new approach, aiming to prevent financial abuse and promote the legal and responsible use of digital assets.

According to Ruslan Magomedov, the head of the NSSMC, establishing fair and understandable taxation rules is crucial for attracting investment and integrating Ukraine’s virtual asset market into the global financial system. The proposed tax scheme suggests that certain crypto transactions, where non-stablecoin cryptocurrencies are exchanged for fiat currency or goods and services without financial losses, would be taxed at Ukraine’s standard personal income tax rate of 18%, plus an additional 5% wartime levy.

Crypto-to-crypto transactions would not be subject to taxation under the proposed scheme, aligning with the practices of several other countries, including Austria, France, and Singapore. The NSSMC also suggested considering a preferential tax rate or exemption for foreign asset-backed stablecoins and certain asset-referenced tokens (ARTs), with proposed rates of either 5% or 9%.

The taxation matrix offers various options for other types of crypto transactions, including mining, staking, hard-forks, and airdrops. Mining could be considered a business activity, while staking could either be treated as business captive income or taxed only at the cash-out stage. Hard-forks and airdrops could be taxed as ordinary income or only at the cash-out stage.

Ukraine had previously introduced a draft law to amend the country’s tax code to cover cryptocurrency in 2023. The country officially legalized its cryptocurrency sector in 2022, with the National Bank of Ukraine currently working on a draft law based on the European Union’s Markets in Crypto Assets (MiCA) regulation.

Ukraine’s proposed tax scheme reflects its commitment to integrating its financial system with global standards, providing clarity and stability for crypto investors and businesses. The move is expected to generate revenue for the government to support its defense efforts while aligning with international best practices.