Ukraine Proposes 23% Tax On Crypto Earnings Amid Market Turmoil

Ukraine has proposed a significant tax on cryptocurrency earnings, aiming to bring clarity and regulation to the digital asset space amidst ongoing market turmoil and the country's conflict with Russia. The proposed tax structure includes an 18% personal income tax on crypto gains, along with an additional 5% military levy, totaling a 23% tax burden for certain categories of crypto earnings. This proposal is currently under parliamentary review and, if approved, will mark a pivotal step in Ukraine's efforts to integrate cryptocurrencies into its financial regulatory framework.

The new tax model will apply to various crypto activities, including mining, staking, and airdrops. However, crypto-to-crypto trades will remain tax-free, providing relief for traders who frequently swap digital assets. This exemption aligns Ukraine with other crypto-friendly nations where digital asset swaps remain untaxed. Additionally, holding crypto will not be taxed; taxes will only apply when virtual assets are converted into fiat currency or real-world assets.

Certain crypto-related activities will be subject to VAT, including paying for goods and services with crypto, rewards for staking or transferring digital assets, and token modifications that result in new crypto creation. Some transactions may qualify for VAT exemptions under the EU VAT Directive. The government has also outlined two methods for taxing investors: net income taxation, where total revenue minus expenses will be taxed, and gross revenue taxation, where a fixed tax will apply to all earnings before deductions.

Ukraine's finance and tax authorities are currently reviewing the bill, with a final decision expected soon. The National Bank of Ukraine is also working on a broader crypto regulatory framework set to launch by October 2025, based on the European MiCA directive. If this proposal is approved, Ukraine's tax-free crypto era could come to an abrupt end, forcing investors to rethink their strategies before the tax laws take effect. The introduction of these tax measures is expected to have a notable impact on both individual crypto investors and businesses operating in the digital asset space within Ukraine, reflecting the country's ongoing conflict and economic challenges.