Russia approves crypto taxation plan, uses FIFO for billing and bans loss carryforwards

According to an official announcement from Russia, on April 27 the Russian government’s legislative committee approved a proposal from the Ministry of Finance to treat digital currency trading as taxable income. The plan uses the first-in, first-out (FIFO) method to calculate costs and stipulates that losses generated by digital currency transactions may not be carried over to future tax periods. On April 21, the Russian State Duma approved the government bill titled “On Digital Currency and Digital Rights” in its first reading with 327 votes in favor, 5 against, and 8 abstentions.

Ministry of Finance Taxation Plan: FIFO Costing, Income Tax, and VAT Exemptions

Under the Ministry of Finance proposal approved by the government legislative committee on April 27:

· Income from digital currency transactions will be subject to personal income tax as income

· Costs will be calculated using the first-in, first-out method (FIFO), and asset costs will be recorded in order of acquisition time

· Losses generated by digital currency transactions may not be carried over to future tax periods

· The following services are planned to be exempt from value-added tax (VAT): services provided by digital custodial entities and cryptocurrency exchanges, as well as sales of specific “non-deliverable foreign digital rights” (crypto futures and contract instruments settled by differences)

· Debt-type digital financial assets (tokenized bonds) will follow a special taxation procedure and will allow losses to be carried over

Crypto Circulation Bill: Tiered Market Access and Licensing Requirements for Intermediaries

Under the bill “On Digital Currency and Digital Rights” passed in its first reading on April 21, cryptocurrency trading may only be conducted through licensed intermediary institutions, including brokers, custodians, and licensed exchanges; rights related to cryptocurrencies must be registered by a dedicated digital depository, and such depositories currently do not exist under Russian law or in the market.

The bill establishes an investor tiering system: after passing a special test, non-professional investors may purchase the most liquid digital currencies listed by the Bank of Russia, with an expected annual transaction limit of 300k rubles for purchases through a single intermediary. After passing a test, professional investors may purchase any cryptocurrency without restrictions on transaction volume.

A representative of the Communist Party of Russia, Nikolai Kolomeytsev, criticized the bill as a “260-page obscure document”; after the parliamentary group of “Just Russia” expressed reservations, it ultimately supported the bill.

Compliance Requirements and Criminal and Administrative Legal Consequences

Under the provisions of the bill, Russian currency residents must report all overseas cryptocurrency transactions to the tax authorities; cryptocurrency wallets may be kept abroad, but their existence and all asset transactions must be reported to the tax authorities. Banks are prohibited from transferring funds to overseas cryptocurrency exchanges or any service providers not authorized by the Bank of Russia unless the licensed intermediary institution has been used.

The bill adds to the Criminal Code a provision on “illegal organization of the circulation of digital currency,” carrying a maximum prison sentence of seven years; conducting transactions using digital currency within Russia will also face administrative fines.

Frequently Asked Questions

What is the FIFO costing mechanism and the loss rules in Russia’s crypto taxation plan?

Under the Ministry of Finance plan approved by the government legislative committee on April 27, cryptocurrency transaction costs are calculated using the first-in, first-out (FIFO) method. Losses generated by transactions may not be carried over to future tax periods, but debt-type digital financial assets (tokenized bonds) are an exception and allow losses to be carried over.

What were the voting results and key restrictions for the first reading of Russia’s crypto circulation bill?

According to official Russian records, the voting results on April 21 were 327 votes in favor, 5 against, and 8 abstentions. The bill provides that crypto transactions may only be conducted through licensed intermediary institutions; the annual limit for non-professional investors is expected to be 300k rubles, and violations of the relevant rules carry a maximum penalty of 7 years in prison.

Do Russian citizens need to report overseas cryptocurrency transactions?

Under the bill passed in its first reading, Russian currency residents must report all overseas cryptocurrency transactions to the tax authorities; cryptocurrency wallets may be kept abroad, but their existence and all asset transactions must be reported to the tax authorities.