- >Kazakhstan Opts to Forgo Tax on Crypto Mining
Kazakhstan Opts to Forgo Tax on Crypto Mining
Governments all around the world are facing difficult decisions regarding cryptocurrencies and their potential impact on economies. Certain countries have posed strict regulations, while others have decided to tax them as capital gains or income for example. Some countries such as China and Russia have banned cryptocurrencies altogether. However, Kazakhstan has decided to take a different approach.
Arthur Crowson | Oct 9, 2020
According to a report published on December 4, 2019 in the business publication Kursiv, the Kazakhstan government will consider cryptocurrency mining as technological advancement rather than an economic job. This means they will not tax individuals who are mining, nor will there be taxes for those holding cryptocurrency. Taxes will only be applied when cryptocurrencies are converted to fiat, and crypto mining farms that provide services for private entities to use their mining hardware will be subject to taxes as they are treated as data centres.
Kazakhstan’s Potential As Mining Hub
Madi Saken, a legislative analyst at the Data Center Industry & Blockchain Association of Kazakhstan, announced the news at a conference called “Blockchain Day” on the same day the publication was released. Though the bill is still being reviewed by the country’s president, assuming that is successful it will go through the lower house in parliament and be put into law.
Saken revealed that the country has decided not to tax cryptocurrency because it is not ‘real money’, and Kazakhstan’s taxation laws only apply to real money. He said, “Tax liabilities only emerge when there is an income in the form of real money, particularly when a cryptocurrency is exchanged for real money, which means it is sold on an exchange. Then, this income in the form of classic money will be subject to taxation.”
If the bill is successful, the government hopes to make the country a crypto mining hub. Kazakhstan already has cheap electricity which is crucial for miners. The access to cheap electricity has already caused global mining companies to set up operations in the Central Asian country. Bitfury announced earlier this year that it was to open data centers in Kazakhstan, teaming up with the Astana International Financial Centre. Other companies are likely to follow suit.
Sharp Contrast to United States
In developed countries such as the United Kingdom, Switzerland, Denmark, etc. digital currencies are being taxed under different clauses such as corporate, capital gains, income, or foreign currency taxes.
In the more restricted states such as China, the regulations are much more pressing. The Chinese government started off by banning Initial Coin Offerings (ICOs) and crypto exchanges altogether. This caused many companies to open offices in other countries such as Kazakhstan.
In the United States, mining is taxable as a source of income. Mined assets are taxed based on the value at the time they are received/mined. All cryptocurrency assets held are also subject to taxation depending on how long they have been held before they have been sold and fall within the category of capital gains.