- The Government of Kyrgyzstan has announced a taxation scheme for cryptocurrency mining.
- Deputy Minister of Economy, Dastan has announced the law in late June 2020, and the related document is published on the official website of the government in late August.
- The framework of law explains that it is developed to introduce cryptocurrency mining taxation in the republic.
The Government of Kyrgyzstan has announced a taxation scheme for cryptocurrency mining. Regarding this, the Ministry of Economy has drafted a resolution on imposing the tax.
Deputy Minister of Economy, Dastan has announced the law in late June 2020, and the related document is published on the official website of the government in late August. The framework of law explains that it is developed to introduce cryptocurrency mining taxation in the republic. It is even proposed to approve a mining tax report form and a method for filling and filing it.
The draftsmen observe that there are at least two options of cryptocurrency mining taxation. In the primary one, the tax is primarily based totally on the profits. The second option provides for taxation of the amount of expenses for virtual money mining. A businessman who intends to pay the mining tax has to submit an application for registration as a taxpayer to the tax authority.
Illegal Cryptocurrency Mining
The government seriously discussed the need for introducing such a scheme in the light of the State Economic Crime Service having publicly reported on this mid-July about the detection of “crime of the century.” The State economic crime service discovered a large mining farm, where the company listed it as a computer laboratory. The company did not produce nor did not pay taxes.
The second company operated as an electricity retailer, which buys electricity from the National Power Grid of Kyrgyzstan and reselling it to the first country. Even though the company received a profit of 21 million soms, it did not pay taxes from its intermediary. The Crime Service ceased the activities of the mining farm. This story has revealed many problems existing in the area of cryptocurrency mining in Kyrgyzstan. It also showed the lack of any legal status for this kind of activity seems to be the main flaw.
Hence, the Economy Ministry decided to determine the taxable base of the mining tax in the form of taxpayer’s expenses during cryptocurrency mining, including VAT and sales tax.
The Boon and Bane
The ministry believed that this would increase the public revenue and contribute to the principle of fair general taxation in Kyrgyzstan, regardless of the operation. The resolution is mainly aimed at developing the economy, considering the situations they are facing now. At the same time, some experts suggest that a 15 percent tax rate recommended by the ministry of the economy can be too high for entrepreneurs, and they are more likely to leave for countries with more liberal situations.