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How much tax do individuals have to pay on cryptocurrency income?
I would like to declare the income I earn from conducting regular P2P (Peer-to-Peer) cryptocurrency trading on cryptocurrency exchanges in accordance with the legislation and pay the applicable taxes. I would like to note that this activity does not involve holding cryptocurrency for a long period for investment purposes. During P2P trading, cryptocurrency is purchased from various individuals and sold to other individuals within a short period of time. The transactions are mainly conducted with stable-value assets, and the net profit from each transaction is approximately 1–3 qəpik. Therefore, although the turnover in the bank account may be high, the actual profit is very small.
I would like to receive information regarding this activity. Is regular P2P buying and selling conducted throughout the day considered non-business activity or business activity? Which type of economic activity (activity code) should be selected when obtaining a VÖEN? Is it possible to be a simplified tax payer for this activity, or must it be conducted under the income tax regime? In P2P transactions, is the taxable amount the total turnover credited to the bank account, or the net profit representing the difference between the purchase and sale prices? How and at what rates are mandatory state social insurance and compulsory health insurance contributions calculated for this activity?
The State Tax Service under the Ministry of Economy has stated that, pursuant to Article 99.3.8 of the Tax Code, any other income of a taxpayer that indicates an increase in the initial value of their assets (when such assets are disposed of), other than salary income, is considered income derived from non-business activity. Individuals earning income from cryptocurrency transactions must register with the tax authorities, obtain a VÖEN, and, in accordance with Article 101.2 of the Tax Code, calculate income tax at a rate of 14% on the income earned. They must submit an “Income Tax Return” to the tax authority no later than March 31 of the following year and pay the tax to the state budget. The time at which the income is deemed to be earned is considered to be the time when the acquired cryptocurrency is disposed of, and the taxable income is based on the increase in the value of the cryptocurrency between the date of acquisition and the date of disposal.
It has also been stated that cashless payment transactions carried out by the taxpayer in connection with cryptocurrency buying and selling must be conducted through accounts opened in accordance with Article 35 of the Tax Code.
In addition, pursuant to paragraph 12 of Article 15 of the Law “On Social Insurance”, mandatory state social insurance contributions are not calculated on income that is not related to employment or business activity. Under Article 15-2.2.2 of the Law “On Medical Insurance”, individuals registered as taxpayers in accordance with the Tax Code (individual entrepreneurs, private notaries, members of the Bar Association, and mediators), except in cases where business activity or other taxable transactions are temporarily suspended, act as insured persons themselves.
Thus, the legislation does not provide for the payment of compulsory health insurance contributions by individuals earning income from cryptocurrency transactions.
You can access the 7-digit economic activity codes here: https://xidmet.info/vahid-standartlar/ifnvs/
I would like to declare the income I earn from conducting regular P2P (Peer-to-Peer) cryptocurrency trading on cryptocurrency exchanges in accordance with the legislation and pay the applicable taxes. I would like to note that this activity does not involve holding cryptocurrency for a long period for investment purposes. During P2P trading, cryptocurrency is purchased from various individuals and sold to other individuals within a short period of time. The transactions are mainly conducted with stable-value assets, and the net profit from each transaction is approximately 1–3 qəpik. Therefore, although the turnover in the bank account may be high, the actual profit is very small.
I would like to receive information regarding this activity. Is regular P2P buying and selling conducted throughout the day considered non-business activity or business activity? Which type of economic activity (activity code) should be selected when obtaining a VÖEN? Is it possible to be a simplified tax payer for this activity, or must it be conducted under the income tax regime? In P2P transactions, is the taxable amount the total turnover credited to the bank account, or the net profit representing the difference between the purchase and sale prices? How and at what rates are mandatory state social insurance and compulsory health insurance contributions calculated for this activity?
The State Tax Service under the Ministry of Economy has stated that, pursuant to Article 99.3.8 of the Tax Code, any other income of a taxpayer that indicates an increase in the initial value of their assets (when such assets are disposed of), other than salary income, is considered income derived from non-business activity. Individuals earning income from cryptocurrency transactions must register with the tax authorities, obtain a VÖEN, and, in accordance with Article 101.2 of the Tax Code, calculate income tax at a rate of 14% on the income earned. They must submit an “Income Tax Return” to the tax authority no later than March 31 of the following year and pay the tax to the state budget. The time at which the income is deemed to be earned is considered to be the time when the acquired cryptocurrency is disposed of, and the taxable income is based on the increase in the value of the cryptocurrency between the date of acquisition and the date of disposal.
It has also been stated that cashless payment transactions carried out by the taxpayer in connection with cryptocurrency buying and selling must be conducted through accounts opened in accordance with Article 35 of the Tax Code.
In addition, pursuant to paragraph 12 of Article 15 of the Law “On Social Insurance”, mandatory state social insurance contributions are not calculated on income that is not related to employment or business activity. Under Article 15-2.2.2 of the Law “On Medical Insurance”, individuals registered as taxpayers in accordance with the Tax Code (individual entrepreneurs, private notaries, members of the Bar Association, and mediators), except in cases where business activity or other taxable transactions are temporarily suspended, act as insured persons themselves.
Thus, the legislation does not provide for the payment of compulsory health insurance contributions by individuals earning income from cryptocurrency transactions.
You can access the 7-digit economic activity codes here: https://xidmet.info/vahid-standartlar/ifnvs/