An international ranking in 2021 placed Ukraine in fourth on a list of countries that had shown the highest level of acceptance towards crypto. By the end of 2022, Ukraine has risen to second, following only the United States.
The situation with Ukraine and Russia transformed the use of cryptocurrencies from a convenient option for payment and investment to a crucial necessity. Only one month into the conflict, Ukraine had already received $100 million in crypto donations.
In response to the dramatic influx of these donations, in March of 2022 Ukrainian President Volodymyr Zelenskyy signed into law the first bill establishing a legal framework for the crypto industry.
As Ukraine continues ramping up its integration of crypto into the economy, understanding how to navigate using digital assets while staying in compliance takes on a new level of importance.
Ukraine’s New Crypto Law
Ukraine passed into law its first bill allowing for the legal operation of foreign and Ukrainian cryptocurrency exchanges and the holding of crypto in Ukrainian bank accounts.
This new legislation defines virtual assets as: an expression of value in figures that can be traded digitally or transferred and can be used for payment or investment purposes.
The Virtual Assets Law provides a framework for establishing the legal position, categorization, and possession of digital assets. Additionally the law highlights regulatory measures aimed at counteracting money laundering and the financing of terrorism.
As a result of its passing, Ukraine has been able to receive hundreds of millions in crypto donations that have gone to humanitarian aid and military functions. The bill has also been crucial for citizens to access their personal funds in the wake of general instability and reduced availability of banking services.
Crypto Compliance in Ukraine
On top of the vast number of crypto donations that have been sent to Ukraine, crypto also functions as a popular option for individuals receiving payments and investing personal funds. It is estimated that 15.72% of the Ukrainian population owns crypto.
As the number of Ukrainians using digital assets for business purposes has grown, the government has put into place various corresponding tax laws. While these have existed in their same form since 2018, as of 2022 one major exception was made, all transactions made in crypto are now subject to a 2% taxation.
Besides this exception, Ukraine’s crypto tax laws have remained unchanged. The Ukrainian tax code considers profits made on virtual assets as personal income. Income earned from virtual asset transactions by individuals and legal entities will be subject to a 5% personal income tax and a 1.5% military duty tax. This is only applicable for digital assets that are sold, and not for ones that are held.
This amendment to the Ukrainian tax code to include the taxation of digital assets is applicable until January 1, 2024, at which date it will undergo revisions. Beginning on January 1, 2024, businesses will most likely be subject to a new tax rate of 18% on profits generated from crypto-related activities, which is the standard rate for both corporate and personal income tax in Ukraine.
For income that is received in the form of virtual assets, the personal income tax rate of 18% is applied.
Compliant Crypto Payments with Rise
As 2023 progresses, the appointed date marking the amendment to Ukraine’s crypto tax law is less than a year away. An alternate crypto-friendly bill has been proposed to avoid the taxes on earnings from virtual assets getting hiked up to 18%. It is unclear, however, which direction the Ukrainian government will take in respect to this heated topic of taxation.
Regardless of which bill gets signed into law by policymakers, Ukrainians holding virtual assets need to be vigilant of the inevitable changes to come. Staying up-to-date on shifting laws in a volatile economy is a time suck but noncompliance is far more costly.
For Ukrainian companies holding treasuries and paying contractors in crypto, the fluidity of virtual asset taxation poses a significantly more intimidating threat.
Regardless of the country in which you or your contractors are based, Rise has an option for streamlining your payroll and scaling your global teams. Whether your treasury is in crypto, your local fiat currency or a combination of the two, you can automate instant compliant payouts with on the Rise Pay platform.
Avoid the costly fallout of noncompliance and let Rise take care of everything- from Know-Your-Customer checks, to verifying employee identity, to compliant global payouts.
Schedule a demo today to experience next-level payroll with Rise.