Crypto Services Get a Major Tax Break
Russia is preparing to exempt cryptocurrency trading and custody services from value-added tax (VAT), marking a significant shift in how the country approaches digital asset regulation.
The proposal, drafted by the Ministry of Finance of Russia, aims to remove VAT from services provided by crypto exchanges and digital asset custodians, as well as related activities tied to issuing and trading cryptocurrencies.
This move signals a clear intent - make crypto infrastructure more viable domestically while keeping tight regulatory control
Exchanges Still Face Standard Corporate Taxes
While VAT may be removed, crypto businesses won’t get a free pass. Profits generated by exchanges and custody providers will still be taxed under rules similar to traditional financial market participants.
This includes revenue from trading fees, custody services, commissions, and intermediary operations, all subject to standard corporate taxation.
In other words, Russia is not offering preferential treatment-it is simply aligning crypto services with existing financial frameworks.
New Rules for Individual Crypto Traders
The legislation also introduces a structured tax system for individual crypto users. Traders will be taxed on profits from selling or exchanging digital assets, including conversions into fiat currency.
However, there is some relief built into the system. Individuals will be allowed to deduct acquisition costs, transaction fees, and related expenses, helping reduce their taxable income.
The framework also introduces a first-in, first-out (FIFO) accounting method, ensuring consistency in how gains and losses are calculated.
At the same time, losses can be offset within the same tax period, but cannot be carried forward, limiting long-term tax planning strategies.
Intermediaries Take on Tax Responsibility
A key feature of the proposal is shifting tax collection responsibility to intermediaries. Brokers, custodians, and other service providers will be required to withhold and transfer taxes directly to the state when handling client funds.
This approach increases compliance while reducing the burden on individual users-but also strengthens government oversight.
Strict Limits on Crypto Access
Despite the tax relief, Russia is tightening restrictions on who can access crypto and how. The government plans to legalize crypto trading under a controlled framework, but with strict limits for everyday investors.
Non-qualified investors will face annual purchase caps of around $3,700, along with restrictions to only the most liquid cryptocurrencies like Bitcoin and Ethereum.
All transactions will need to go through licensed domestic providers, making it difficult to use international exchanges without intermediaries.
A Controlled Crypto Ecosystem
The broader legislative package, including the draft law “On Digital Currency and Digital Rights” reflects Russia’s strategy to control-not eliminate-crypto activity.
The government is aiming to legalize crypto within a tightly regulated environment, ensuring visibility over transactions while limiting capital outflows.
The Bigger Picture
Russia’s approach is a balancing act. On one hand, removing VAT makes crypto services more attractive and competitive domestically. On the other, strict trading limits and centralized oversight ensure that the state maintains control.
This model reflects a growing global trend - embrace cryptobut on government terms.
