President of Kazakhstan Kassym-Jomart Tokayev has signed into law a bill amending the country’s Tax Code to impose higher tax rates on crypto miners. Based on how much and what the average price of electricity is used in extracting digital currencies such as bitcoin, the levy will be determined.
Kazakhstan Cryptocurrency Miners to Pay More Taxes
President Tokayev of Kazakhstan has signed a new piece of legislation introducing changes to the nation’s law “On Taxes and Other Mandatory Payments to the Budget” and supplementary law enhancing the implementation of the Tax Code. These amendments provide cryptocurrency mining with differentiated rates of tax.
Calculating the average cost of electricity used for minting coins in a particular tax period will determine the precise levies. The levies start at 1 Kazakhstani Tenge, which is approximately. $0.002 at the time of writing) per kilowatt-hour (kWh), when a miner paid 25 tenge or more ($0.053) per kWh, and can reach 10 tenge, if the electricity tariff was in the range of 5 – 10 tenge ($0.011 – $0.021).
Cryptofarms that generate electricity from renewable sources are subject to the lowest tax rate of 1 tenge per unit (kWh), regardless its cost. This surcharge was imposed on January 1, 2022 after Central Asia experienced a rising power shortage over the past year. The shortages were blamed on the influx of crypto miners that followed China’s decision to crack down on the industry in May 2021.
New Tax Rates to Reduce Load on Nation’s Power Grid, Government Says
Kazakhstan also tried to restrict cryptocurrency mining by imposing electricity restrictions during winter months, and closing down all coin-mining plants in its territories. These measures caused some companies to relocate or shift significant parts of their equipment to new mining areas.
The President Tokayev directed the relevant authorities in February to find all cryptocurrency miner operating in Kazakhstan, and increase their taxes. The state auditors pursued miners who allegedly took advantage of tax advantages they weren’t supposed to receive in April.
That month, the government in Nur-Sultan announced it’s preparing to increase the tax burden for miners and one of the initial proposals was to tie the new rate to the value of the minted cryptocurrency. Official statements state that the new tax rules will reduce the demand for electricity from the country and increase the efficiency of the grid.
Are you expecting more cryptocurrency miners to move out of Kazakhstan following the tax hike? Comment below to share your opinions.
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