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Reference:
Titorenko S.K.
Legal regulation of taxation of income of individuals on transactions with digital financial assets
// Legal Studies.
2023. № 4.
P. 45-54.
DOI: 10.25136/2409-7136.2023.4.40507 EDN: QTHVPH URL: https://en.nbpublish.com/library_read_article.php?id=40507
Legal regulation of taxation of income of individuals on transactions with digital financial assets
Titorenko Semen Konstantinovich
Lecturer, Department of International and Public Law Department, Financial University under the Government of the Russian Federation
125167, Russia, Moscow, Leningradsky ave., 49/2
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titorenko96.st@gmail.com
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DOI: 10.25136/2409-7136.2023.4.40507
EDN: QTHVPH
Received:
15-04-2023
Published:
22-04-2023
Abstract:
The author discusses the features of the legal regulation of taxation of transactions of individuals with digital financial assets of the Russian Federation. As a result of the study, the author identified a gap in the legal regulation of taxation of digital financial assets in the Russian Federation, when comparing the concept of digital financial assets and tokens. Public relations arising in connection with the turnover of digital financial assets are regulated by the CFA Law, while neither legislation nor law enforcement practice has determined whether the provisions of the CFA Law apply to relations regarding objects corresponding to the characteristics of digital financial assets, but issued in violation of the CFA Law. In this connection, it is necessary to determine whether the norms of the Tax Code of the Russian Federation apply to relations with tokens (digital financial assets) that were issued before the adoption of the CFA Law. The problem is that there is currently no explanation regarding the applicability of the CFA Law to the relations that arise regarding digital financial assets (tokens) that were issued before the CFA Law came into force. Goal of the study was to investigate the experience of foreign legislation and law enforcement practice of the Russian Federation and to identify the problems of legal regulation of taxation of income of individuals on transactions of individuals with digital financial assets.
Keywords:
digital financial assets, tokens, distributed ledger system, taxation, personal income tax, tax control, judicial practice, cryptocurrencies, blockchain, USDT
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You can find original text of the article here.
The Russian Federation has introduced Federal Law No. 324-FZ dated 14.07.2022 "On Amendments to Part Two of the Tax Code of the Russian Federation" [1] on Taxation of digital Financial Assets and digital Rights, including both a digital financial asset and a utilitarian digital right (hereinafter referred to as the "CFA"). A feature of the legal regulation of cryptocurrency turnover in the Russian Federation is the creation of a separate law aimed at comprehensive regulation of cryptocurrency turnover. So, from January 1, 2021 Federal Law No. 259-FZ dated 31.07.2020 "On Digital Financial Assets, Digital Currency and Amendments to Certain Legislative Acts of the Russian Federation" [2] (hereinafter referred to as the "CFA Law") came into force, the introduction of this law confirmed the legal status of the token and as a result became the basis for calculating and paying taxes for transactions made with tokens, in terms of taxation of income received from the turnover of cryptocurrencies, the issue remains debatable, since the concept of "digital currency" is not identical to the scientific and technical concept of cryptocurrency. In terms of the legal regulation of taxation of personal income, as mentioned above, the relevant federal law has been adopted. At the same time, the law does not determine unambiguously whether the legal concept of a digital financial asset and the generally accepted concept of a token coincide. The law identifies a certain list of features that define the concept of digital law: - type of digital law; - may consolidate: a monetary claim or certain rights on securities provided for by the decision to issue digital financial assets; - the issuance, accounting, circulation of digital financial assets is possible in an information system based on a distributed registry system or in another information system. The discrepancy between the concepts established by the legislator and the concepts used directly by the participants of the relevant market is a characteristic feature of the legal regulation of the cryptocurrency market of the Russian Federation. Based on the enumeration of the above features, it can be assumed that the legislation uses the definition of "distributed registry system" instead of the generally accepted concept of "blockchain". Similarly, it can be assumed that in the CFA Law, the legislator intended to use the concept of a token, the concept of a digital financial asset instead. It should be noted that a characteristic feature of the token that distinguishes it from cryptocurrencies is the possibility of centralized issuance. It is this feature in the definition of digital financial assets issued in an information system based on a distributed ledger system ("blockchain") that gives reason to believe that the legislator intended to introduce exactly the definition of a token. At the same time, it is important to note that there are alternative views of legal scholars on the qualification of digital financial assets, so K.B. Razdorozhny [3] makes an unambiguous conclusion that a digital financial asset enshrines the concept of cryptocurrency in legislation. Among the scientists who qualify a token as a digital financial asset, it should be noted M.Y. Kuzmenkova [4] notes that a digital financial asset is exactly a token and distinguishes several subspecies: a payment token, a utility token and asset tokens. A similar position is held by A.V. Shamraev [5], who points out that the introduction of the concept of a digital financial asset made it possible to consolidate all the known features of the token and brought it out of the legal vacuum. Since the second half of 2022, the process of issuing CFA has begun in the Russian Federation, in particular, Sberbank Group of companies has started issuing CFA, and using the example of the first decisions, it is possible to determine the procedure for implementing the provisions of the CFA Law. Thus, the Sberbank Group has defined the rules of the information system [6], within which the CFA issue is carried out, as well as the first decisions on the CFA issue have been published [7, 8, 9, 10, 11, 12]. At the same time, from the published decisions on the release of the CFA, published on the website of the operator of the information system in which the release of the CFA is carried out, it follows that the decisions fully comply with the requirements of the CFA Law. In this case, the question arises, is full compliance with the requirements of the CFA Law a necessary feature of the CFA, which distinguishes CFA from tokens? For example, there are tokens issued by non-residents of the Russian Federation, for example, one of the most popular tokens [13]: - USDT; - Bitcoin BTC; - EthereumETH; - Shiba InuSHIB, etc. The listed tokens were issued in accordance with foreign legislation and do not fully comply with the requirements of the CFA Law. In particular, decisions on the issue of tokens that comply with the requirements of the CFA Law have not been published and information about the CFA issuer has not been disclosed to the appropriate extent. This discrepancy leads to the question of whether the norms of Article 214.11 of the Tax Code of the Russian Federation apply to the income of individuals received from the sale of tokens or not. In accordance with the norms of Article 214.11 of the Tax Code of the Russian Federation, personal income tax is calculated based on the financial result, which means income from transactions with CFA, minus expenses on transactions with CFA. At the same time, as a general rule, the personal income tax is calculated based on the income of individuals, without a corresponding deduction of expenses.
Thus, as a general rule, the personal income tax is calculated at the rate of 13% of the income received, if the income exceeds 5 million rubles, the tax is calculated at the rate of 15% of the income received. In this regard, the question arises whether the norms of the CFA Laws apply to previously issued tokens that do not comply with the requirements of the CFA law. In order to conduct the research, the author studied the judicial practice in cases related to the relations on the turnover of tokens and digital financial assets, in particular, the author conducted a study on the example of law enforcement practice in relation to transactions with the generally recognized (classic) USDT token. So, for example, in the Decision of the Arbitration Court of the City of Moscow dated 03.11.2022 in case no.A40-243242/2021 [14] (dispute on recovery of unjustified enrichment) The court qualified USDT as a digital financial asset of the Tether token, therefore, the court recognized the application of the CFA Law to the relations arising from the generally recognized token. Similarly, in the Ruling of the Arbitration Court of the Republic of Tatarstan dated 11.10.2022 in case No. A65-21581/2021 [15], the court recognized the application of the concept of CFA to relations arising over USDT. However, the above acts are an exception, in most cases the courts do not define USDT through the concept of CFA [16, 17], which is enshrined in legislation. Also, the author notes that even in the listed judicial acts, the Ninth Arbitration Court of Appeal is the highest court that applied the provisions of the CFA Law to relations arising from transactions with USDT. Consequently, most courts, in the absence of clear explanations and recommendations, do not dare to apply the provisions of the CFA Law to relations arising about generally accepted (classical) tokens. At the same time, in foreign legislation, the concept of a token is not differentiated into a concept similar to a "digital financial asset" and the concept of a "token" [18, 19]. Consequently, a foreign legislator does not have such a differentiation, similar to the relations in the Russian Federation. In particular, the author notes that this situation underlines the importance of the development of information law in the Russian Federation. The development of the digital environment causes the need for appropriate legal regulation, so in the absence of a clear and unambiguous understanding of the terminology used in the field of legal regulation of the digital environment entails an ambiguous understanding of the legal regulation of other industries regulating relations arising about objects of the digital environment. Thus, tax law requires the establishment of clear and consistent norms that regulate the relevant relations. Otherwise, a dispute arises when determining the tax base when conducting transactions (operations), for example, with generally recognized (classical) USDT tokens, whether it is necessary to calculate personal income tax from income from transactions with digital financial assets or from the financial result of transactions with digital financial assets. In this case, an error in determining the tax base may entail significant and unjustified property losses of an individual. At the same time, it is necessary to note the progressiveness of the legislation of the Russian Federation, since foreign legislation has no similar analogues. Based on the analysis of the norms of the CFA Law, the concept of the CFA and the concept of the token are identical, therefore, the norms of Article 214.11 of the Tax Code of the Russian Federation are subject to application to relations arising regarding tokens issued before the entry into force of the CFA Law. In conclusion, the author notes that appropriate clarifications are needed by the Supreme Court of the Russian Federation on law enforcement practice, regarding the applicability of the norm of the CFA Law to relations arising from transactions with tokens.
References
1. Federal Law No. 324-FZ of 14.07.2022 "On Amendments to Part Two of the Tax Code of the Russian Federation";
2. Federal Law No. 259-FZ of 31.07.2020 "On Digital Financial Assets, Digital Currency and on Amendments to Certain Legislative Acts of the Russian Federation";
3. Razdorozhny, K.B. Financial and legal regulation of digital financial assets in the Russian Federation and in foreign countries : dissertation for the degree of Candidate of Legal Sciences.-Moscow, 2021.-p. 175.
4. Kuzmenkov, M.Yu. Legal regulation of cross-border turnover of digital assets: dissertation for the degree of Candidate of Legal Sciences.-Moscow, 2022.-p. 179.
5. Shamraev, A.V. Digital financial assets: international approaches to regulation and their impact on Russian law / A.V. Shamraev // Banking Law.-2021.-p. 63-75.
6. The rules of the Beac information system, in which the issue of digital financial assets is carried out, approved. Resolution of the Management Board of Sberbank of 21.12.2022 No. 702§44a. URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/pravila_inf_sistemy.pdf (accessed: 04/17/2023);
7. The decision on the issue of digital financial assets of PJSC Sberbank of Russia dated 09.12.2022. URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/reshenie-o-vypuske-09122022.pdf (accessed: 04/17/2023);
8. The decision on the issue of digital financial assets of Fors-E LLC dated 03/14/2023 registration number DBFEFC7E. URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/reshenie-o-vypuske-14032023.pdf (accessed: 04/17/2023);
9. Decision on the issue of digital financial assets of LC FORESIGHT LLC dated 03/15/2023, registration number F2157B6D URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/reshenie-o-vypuske-14032023.pdf (accessed: 04/17/2023);
10. Decision on the issue of digital financial assets of Kazan Transport Company LLC dated 03/23/2023, registration number 9AF3A561 URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/reshenie-o-vypuske-23032023.pdf (accessed: 04/17/2023);
11. The decision on the issue of digital financial assets of LLC "IDK ENKO" dated 03/24/2023, registration number 562C366E. URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/reshenie-o-vypuske-24032023.pdf (accessed: 04/17/2023);
12. The decision on the issue of digital financial assets of LLC "Terma" dated 03/28/2023, registration number 4564DAF4. URL: http://www.sberbank.ru/common/img/uploaded/legal/docs/digital-assets/reshenie-o-vypuske-28032023.pdf (accessed: 04/17/2023);
13. Top 100 Crypto Tokens by Market Capitalization. URL: https://coinmarketcap.com/tokens / (accessed: 04/17/2023);
14. The decision of the Arbitration Court of the city of Moscow dated 03.11.2022 in case no.A40-243242/2021 // URL: https://kad.arbitr.ru / (accessed: 04/17/2023);
15. Ruling of the Arbitration Court of the Republic of Tatarstan dated 11.10.2022 in case no. A65-21581/2021 // URL: https://kad.arbitr.ru / (accessed: 04/17/2023);
16. The decision of the Arbitration Court of the city of Moscow of 06/02/2023 in case no.A40-11964/2022 (date of appeal: 04/17/2023);
17. Resolution of the Seventeenth Arbitration Court of Appeal of 02/27/2023 in case no. A60-66718/2021 // URL: https://kad.arbitr.ru /(accessed: 04/17/2023);
18. Gesetz über das Kreditwesen [KWG], Sept. 9, 1998, Bundesgesetzblatt [BGBl.] I at 2776, § 1, para. 11, sentence 1, No. 10. URL: https://perma.cc/2VEN-DEUU (accessed: 04/17/2023).
19. Loi by. 2019-486 du 22 mai 2019 relative à la croissance et la transformation des entreprises, May 23, 2019. URL: https:// perma.cc/X5D2-J33J (accessed: 04/17/2023).
First Peer Review
Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
The list of publisher reviewers can be found here.
A REVIEW of an article on the topic "Legal regulation of taxation of income of individuals on transactions with digital financial assets". The subject of the study. The article proposed for review is devoted to topical issues of legal regulation of taxation of income of individuals on transactions with digital financial assets. The author examines promising areas for the development of tax legislation regarding the relations on taxation of income of individuals on transactions with digital financial assets. The subject of the study was the norms of legislation and materials of practice. Research methodology. The purpose of the study is not stated directly in the article. At the same time, it can be clearly understood from the title and content of the work. The purpose can be designated as the consideration and resolution of certain problematic aspects of the issue of legal regulation of taxation of income of individuals on transactions with digital financial assets. Based on the set goals and objectives, the author has chosen the methodological basis of the study. In particular, the author uses a set of general scientific methods of cognition: analysis, synthesis, analogy, deduction, induction, and others. In particular, the methods of analysis and synthesis made it possible to summarize the legislative framework on the presented topic, as well as draw specific conclusions from the materials of judicial practice. The most important role was played by special legal methods. In particular, the author actively applied the formal legal method, which made it possible to analyze and interpret the norms of current legislation (first of all, the norms of the legislation of the Russian Federation). For example, the following conclusion of the author: "A feature of the legal regulation of cryptocurrency turnover in the Russian Federation is the creation of a separate law aimed at comprehensive regulation of cryptocurrency turnover. So, from January 1, 2021 Federal Law No. 259-FZ dated 07/31/2020 "On Digital Financial Assets, Digital Currency and Amendments to Certain Legislative Acts of the Russian Federation" [2] (hereinafter referred to as the "CFA Law") entered into force, the introduction of this law confirmed the legal status of the token and as a result became the basis for calculating and paying taxes regarding transactions made with tokens, in terms of taxation of income received from the turnover of cryptocurrencies, the issue remains debatable, since the concept of "digital currency" is not identical to the scientific and technical concept of cryptocurrency." At the same time, it is surprising that the author, discussing one of the most popular research topics in science, does not generalize the opinions of scientists on the essence of digital rights, their signs, etc., as well as scientific approaches to aspects of taxation in this area. Thus, the methodology chosen by the author is not fully adequate to the purpose of the study, does not allow to study all aspects of the topic in its entirety. Relevance. The relevance of the stated issues is beyond doubt. There are both theoretical and practical aspects of the significance of the proposed topic. From the point of view of theory, the topic of legal regulation of taxation of income of individuals on transactions with digital financial assets is complex and ambiguous. As the author of the article correctly notes, "In terms of the legal regulation of taxation of income of individuals, as indicated above, the relevant federal law has been adopted. At the same time, the law does not determine unambiguously whether the legal concept of a digital financial asset and the generally accepted concept of a token coincide." Thus, scientific research in the proposed field should only be welcomed. Scientific novelty. The scientific novelty of the proposed article is beyond doubt. Firstly, it is expressed in the author's specific conclusions. Among them, for example, is the following conclusion: "tax law requires the establishment of clear and consistent norms that regulate the relevant relations. Otherwise, a dispute arises when determining the tax base for transactions (operations), for example, with generally recognized (classic) USDT tokens, whether it is necessary to calculate personal income tax on income from transactions with digital financial assets or from the financial result of transactions with digital financial assets. In this case, an error in determining the tax base can lead to significant and unjustified property losses of an individual. At the same time, it is necessary to note the progressiveness of the legislation of the Russian Federation, as foreign legislation has no similar analogues." These and other theoretical conclusions can be used in further scientific research. Secondly, the author suggests ideas for improving the current legislation. The above conclusions may be relevant and useful for law-making activities. Thus, the materials of the article may be of particular interest to the scientific community in terms of contributing to the development of science. Style, structure, and content. The subject of the article corresponds to the specialization of the journal "Legal Studies", as it is devoted to legal problems related to the regulation of relations in the tax sphere. The content of the article fully corresponds to the title, as the author considered the stated problems and achieved the research goal. The quality of the presentation of the study and its results should be recognized as fully positive. The subject, objectives, methodology and main results of the study follow directly from the text of the article. The design of the work generally meets the requirements for this kind of work. No significant violations of these requirements were found. Bibliography. It is impossible to evaluate the literature used, since the author did not give the opinions of scientists on the stated problems. This can also be seen from the list of literature, which does not contain the works of scientists to which the author would refer. This is all the more strange, since there are many different works and scientific approaches on the aspects of regulating relations regarding digital rights. In order for the article to be published, the scientific aspects of the topic should be considered. Appeal to opponents. The author has not analyzed the current state of the problem under study. Conclusions, the interest of the readership. The conclusions are fully logical, as they are obtained using a generally accepted methodology. The article may be of interest to the readership in terms of the systematic positions of the author in relation to the stated issues, but only after expanding the theoretical base of the study. Based on the above, summarizing all the positive and negative sides of the article, "I recommend sending it for revision"
Second Peer Review
Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
The list of publisher reviewers can be found here.
The subject of the study. The reviewed article "Legal regulation of taxation of income of individuals on transactions with digital financial assets" as the subject of the study has tax relations in the field of income of individuals on transactions with digital financial assets or from financial results on transactions with digital financial assets, and their legal regulation. Research methodology. The methodological apparatus of the article consists of modern methods of scientific cognition: historical, formal-logical, legal-technical, formal-dogmatic, comparative jurisprudence, etc. The author of the article also used such scientific methods and techniques as deduction, modeling, systematization and generalization. The article used a combination of theoretical and empirical information. Relevance. Improving the turnover of digital assets, making various transactions with digital financial assets necessitates proper legal regulation of this area of public relations. As the author of the article correctly notes, "the development of the digital environment causes the need for appropriate legal regulation, so in the absence of a clear and unambiguous understanding of the terminology used in the field of legal regulation of the digital environment entails an ambiguous understanding of the legal regulation of other industries regulating relations arising regarding objects of the digital environment." Despite global digitalization, there are many unresolved issues, in particular, related to legal regulation, including the problems of taxation of income of individuals on transactions with digital financial assets or from the financial result of transactions with digital financial assets. For these reasons, the relevance of the topic outlined by the author is beyond doubt. Scientific novelty. The article has elements of scientific novelty. The author considers a new aspect of introducing terminological clarity into the conceptual apparatus of digital law, in particular, from the perspective of legal regulation of tax relations, namely taxation of income of individuals on transactions with digital financial assets or from the financial result on transactions with digital financial assets. Style, structure, content. The article is written in a scientific style, using special legal terminology. The article is structured (introduction, main part, conclusion), although it is not formally divided into parts. The content of the article reveals the topic. The material is presented consistently, competently and clearly. The theoretical provisions are illustrated by practical examples. The author's conclusions and suggestions are well-reasoned. Bibliography. The author has used several sources on this topic, including publications of recent years. However, it cannot be said that the number of publications studied by the author is sufficient for a scientific article. It is suggested to get acquainted with other publications, for example, to study the works of A.V. Bodyako, N.E. Leontieva, P.V. Petrova, L.V. Sannikova, Y.S. Kharitonova, etc. Bibliographic sources are designed in accordance with the requirements of GOST. Appeal to opponents. Appealing to the opinions of other scientists dealing with this issue is correct. All borrowings are presented in the form of citations with links to the source of the publication. Conclusions, the interest of the readership. The article "Legal regulation of taxation of income of individuals on transactions with digital financial assets" submitted for review is recommended for publication, since it meets the requirements for scientific articles, is relevant, practical and has elements of scientific novelty. The article may be of interest both for scientists dealing with the problems of information, digital, financial and tax law, and for practitioners, as well as for teachers and students of law schools.
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