Kyrgyzstan Proposes a Law to Tax Cryptocurrency Mining After Banning The Same In 2014
According to reports from the regional news outlet Kabar, the Ministry of Economy of the Kyrgyz Republic has submitted a draft law “On Amending the Tax Code”. The law will introduce taxes on cryptocurrency mining activities.
Back in July 2014, the central law authority of the country had explicitly banned cryptocurrencies. The National Bank of the Kyrgyz Republic issued a report, deeming the use of Bitcoin and other virtual currencies, illegal under the national law.
In 2017, October, the Central Bank reportedly stated that ‘it was not considering introducing any prohibitions or restrictive measures regarding the mining of cryptocurrency.’ Although the country is yet to modify its ban on virtual currencies, the use of blockchain technology and crypto mining activities are legal.
After that, on January 17, 2018, the head of the National Bank of Kyrgyzstan, Tolkunbek Abdygulov, stated that the Bank did not plan to obstruct the evolution of the cryptocurrency market in Kyrgyzstan. He added that it was very difficult to ban something that ‘the Central Bank does not mint and that residents of Kyrgyzstan investing in cryptocurrency do so at their own risk ‘.
Despite the ban on the use of cryptocurrencies as a mode of payment, the Kyrgyz Republic has about 80 thousand technical devices that allow cryptocurrency mining.
It is anticipated that the newly levied taxes on cryptocurrency mining would increase the budget revenues and contribute to the universal principle of fair taxation, which is prevalent in Kyrgyzstan; it would be applicable regardless of the type of business (legal business only) involved.
The Ministry of Economy of the republic appears to be exploring two possibilities to implement taxes on cryptocurrency mining. The first option would be the taxation of income, while the second would be taxing expenses incurred during cryptocurrency mining.
The crypto miners are paid when they mine cryptocurrencies. This leads to the creation of new assets, and these newly generated assets improve income, so, the Tax Code of the country requires such income to be taxed.
Kabar’s report also suggests that the government of the Kyrgyz Republic stands to earn around 300 million Kyrgyzstani Som ($4.2 million). It would be quite significant in a country whose annual budget reaches around $1 billion only.