Miners can make major rewards as they participate in mining activities, as many companies and even individuals have learned. However, in Kazakhstan, since cryptocurrency isn’t considered to truly be money, miners aren’t taxed for these activities, due to new laws implemented this week.
- Funds resulting from cryptocurrency mining are only taxed when they are converted into fiat currency.
- Cryptocurrency mining is only an entrepreneurial activity if cryptocurrency mining hardware use is offered as a service.
Mining is an essential component for the cryptocurrency industry, though high electricity fees can make turning a profit more difficult in some areas.
The process itself is treated the same way as self-employment, by some countries, resulting in taxation of the miners associated with it. According to lawmakers in Kazakhstan, this will not be the case for miners in their region.
As mining isn’t considered to be an entrepreneurial activity, miners won’t be taxed while they participate in it, according to reports from the local Kursiv publication. Instead, it is considered a “purely technological process.” However, the new legislation states that the funds will be taxed when the mined cryptocurrency is exchanged for its real-world value in fiat currency.
The news was announced at “Blockchain Day” by Madi Saken, legislative analyst at the National Association for the Development of the Blockchain and the Industry of Data Centers of the Republic of Kazakhstan, on December 4th. The announcement was confirmed by Cointelegraph via email correspondence with Saken.
Based on the report, the lawmakers in Kazakhstan have already finalized laws on the taxation of cryptocurrency, though the presidential administration presently has the laws under consideration. This month, the bill is due to be sent to the lower house of the Parliament of Kazakhstan, which is the Mazhilis.
With this new law, both the legal status and taxation of cryptocurrency mining will be established. Saken noted that tax liabilities are only applicable to “real money,” which digital assets and cryptocurrencies aren’t considered to be. However, when converted into fiat currency, the taxes will be applied. Explaining further, Saken stated,
“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.”
At this point, the only circumstance in which crypto mining is categorized as an “entrepreneurial activity” is if there is a service that allows an individual or company to use their mining hardware. Hence, mining farms will be taxed, as well as data centers.
Even with this taxation, the government in Kazakhstan has been more supportive and optimistic in the cryptocurrency and blockchain sectors.
The governor of the Astana International Financial Center (AIFC) stated that last year that the innovation of cryptocurrency and blockchain technology will continue, even as the need of regulation arises.
AIFC, the main financial hub in Kazakhstan, partnered with the Bitfury blockchain tech firm in May this year, with the purpose of incorporating blockchain technology in multiple industries.