Is there a tax on cryptocurrency and how much is it?.

Cryptocurrency has long become one of the most sought-after alternative currencies. However, with the increase in its popularity, many restrictions have also emerged. Thus, investors increasingly ask the question of whether there is a tax on cryptocurrency, and if so, how much they will have to pay. 

In general, the tax on cryptocurrency depends on the country in which the investor officially pays taxes. But this tax is not universal. Therefore, in some countries, it is a more relevant currency, while in others, crypto is not so attractive. 

Is there a tax on crypto?

It should be noted that cryptocurrency is gaining popularity. It becomes a salvation for many investors. However, considering taxes, such an investment does not always deserve attention. 

In general, cryptocurrency is a digital asset that exists on the basis of blockchain technology. In Ukraine, there is currently no separate law that fully regulates the circulation of cryptocurrencies, but steps have already been taken to create a legal framework. 

If we look at the legal framework specifically, in 2021, the law "On Virtual Assets" was adopted, which defines cryptocurrency as an asset, but it has not yet come into full force. This means that cryptocurrency in Ukraine is in a gray area of legislation. However, starting from 2025, the status of cryptocurrency in Ukraine may change. There are many prerequisites for this. That is, the popularity of crypto will grow, but new restrictions will also emerge (for example, quite high taxes). 

Returning to 2024, at present, cryptocurrency is considered property, which determines the rules for its taxation:

1. Personal income tax. This is the main tax that investors pay in Ukraine. When selling cryptocurrency and making a profit, you are obligated to pay this tax.

2. Military levy. In addition to income tax, you pay a military levy of 1.5%. More accurately, this was the case before, but today this tax has increased. The reason for this is the ongoing war in Ukraine. 

3. How is the tax calculated? In general, this system is quite simple. The profit is calculated as the sale amount minus the purchase amount. How it works in theory: an investor bought bitcoin for 500,000 UAH and sold it for 700,000 UAH. Then the profit will be 200,000 UAH. From this amount, you need to pay 2 taxes (the general levy and the military levy). 

It is important to understand that there is currently no single mechanism for regulating this issue. However, active work is underway. 

Which operations require paying taxes? 

Not all operations with cryptocurrency are subject to taxation. It is necessary to understand when taxes are most likely to be paid: 

1. You will definitely have to pay taxes. Selling cryptocurrency for fiat money (hryvnia, dollar, euro, etc.), exchanging one cryptocurrency for another if a profit is recorded, and earning income from mining.

2. You can avoid taxation if the investor only stores cryptocurrencies.  Transferring cryptocurrency between wallets and receiving cryptocurrency as a gift (the issue of gifts is not yet clearly regulated) is also not subject to tax. 

In each individual case, the general conditions may vary slightly. 

Regarding declaration 

In Ukraine, to pay taxes, a declaration must be prepared. To comply with the law, the investor must also declare income from operations with cryptocurrency. How to do this: 

1. First, you need to prepare documents. Keep all supporting documents: receipts for purchases, sales, exchanges of cryptocurrency. Also, make sure you have statements from crypto exchanges and bank accounts.

2. Then you can submit the declaration. The annual income declaration is submitted by May 1 of the following year. Also, income from cryptocurrency is included in the total taxable income.

3. If everything is done correctly, you need to pay the tax. The tax must be paid by August 1 of the same year.

This procedure is simple and quite understandable. 

What happens if taxes are not paid?

If the investor decides not to pay taxes on crypto, they may face a whole range of consequences. What is being talked about:

1. Fine. For failure to submit a declaration – up to 10% of the amount of unpaid tax. For late tax payment – up to 20% of the debt amount.

2. Checks may also be conducted. The tax service may request information about your transactions on crypto exchanges.

3. In addition to the fine, there may be freezing of funds. In some cases, your accounts may be frozen until the circumstances are clarified.

That is, avoiding taxation is quite risky. 

What to do to avoid tax problems? 

To avoid unpleasant situations related to cryptocurrency taxation, it is better to secure yourself in advance. What is being discussed: 

1. Keep a record of transactions: write down all data about purchases, sales, and exchanges of cryptocurrency.

2. Keep documents: statements from exchanges, receipts, and other supporting documents can be useful in case of an audit.

3. Consult with tax specialists: if you are unsure about your calculations, it is better to seek help.

4. Monitor changes in legislation: laws on cryptocurrency change rapidly, and it is important to stay updated on innovations.

A few words should be said about the fact that serious changes are coming regarding the taxation of investors trading crypto. 

What is most likely to happen: 

1. Introduction of benefits: for example, a reduction in the tax rate on income from cryptocurrency.

2. Simplification of declaration: creation of online platforms for automatic calculation and payment of taxes.

3. Stricter control: tax authorities may start monitoring cryptocurrency transactions more actively.

From the latest news, cryptocurrency will become legalized in Ukraine at the beginning of 2025. However, there will be no tax benefits. This has already been announced by MP Hetmantsev. Currently, the working group is finishing the preparation of the relevant draft law. It will be coordinated with the National Bank. The complete draft law is expected after the New Year.