Ukraine’s Securities and Exchange Commission has proposed a 23% tax on income derived from cryptocurrency transactions, which includes an 18% personal income tax and a 5% military levy—a wartime surcharge that has been in place since the country’s ongoing conflict with Russia began.
Outlined in a 32-page consultation paper, the proposal marks a major step toward formalizing the country’s approach to taxing digital assets. However, regulators admit that enforcing such a tax on crypto transactions is extremely complicated.
“One of the most complex aspects of building a digital asset tax system is the taxation of personal income from crypto transactions,” the Commission stated.
Why It’s Complicated
The regulator outlined multiple challenges:
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Anonymity and decentralization: Since most crypto transactions occur through decentralized exchanges or self-hosted wallets, tax authorities cannot automatically track income.
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Lack of intermediaries: Unlike traditional income streams such as salaries or dividends, which are taxed at the source by employers or banks, individuals are solely responsible for self-reporting crypto income.
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Missing acquisition costs: Many users may not be able to prove how they obtained or purchased crypto assets—especially if the assets were acquired via peer-to-peer exchanges, mining, or airdrops.
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Volatile market prices: Sudden price drops can result in taxpayers owing taxes on unrealized “paper profits” that vanish by the time tax payments are due.
“Rapid changes in crypto prices can lead to situations where a person is obliged to pay tax on ‘paper profit’ that disappeared due to a market drop,” the agency warned.
Tax Confusion and Non-Compliance
The Commission also noted that many crypto users are unaware they even owe taxes on their gains. As a result, Ukraine is considering simplified reporting models, a system to tax only on fiat withdrawals, and digital tools to make tax compliance easier.
The proposed tax overhaul comes as Ukraine continues to modernize its financial infrastructure amid war and economic uncertainty. Earlier efforts to regulate crypto have included legalizing digital assets as part of its post-war reconstruction strategy and seeking to align with European Union standards.
Still, the proposed 23% tax rate may raise concerns among the crypto community, especially given the global debate on how to fairly tax decentralized assets without stifling innovation or driving users to the underground economy.
For more updates on crypto regulation, taxation, and policy developments in Europe and beyond, visit TheCoinInfo.
