Russia plans to impose value-added tax (VAT) on companies renting mining equipment or data centers to overseas enterprises and mining pools.

Written by: TaxDAO

1. News Overview

Russia plans to impose VAT on companies renting mining equipment or data centers to overseas enterprises and mining pools.

Starting from September 1, 2024, Russia will officially allow the use of cryptocurrencies in cross-border trade and digital asset exchanges, covering mainstream currencies such as Ethereum (ETH) and stablecoin USDT. This marks the country as one of the few globally to incorporate cryptocurrencies as legal payment tools. In November of the same year, the Russian cryptocurrency mining industry gained legal status, ending years of operation in a gray area. By January of this year, Russian law requiring all industrial miners and "Mining Infrastructure Operators (MIO)" to register in the national directory officially came into effect. As of April 1, 2025, 116 MIOs and 606 industrial miners (промышленные майнеры) have completed registration, but the Federal Tax Service (FTS) believes that many enterprises remain non-compliant. The directory is managed by the FTS, which is currently formulating tax regulations for the annual profits of industrial miners (промышленные майнеры) and MIOs.

On May 1, 2025, the Russian Ministry of Finance plans to impose VAT on companies renting mining equipment or data centers to overseas enterprises and mining pools, as well as energy companies providing electricity to foreign mining enterprises. The Ministry stated that this move aims to clarify the tax process for mining equipment rentals and establish tax rules for companies providing "mining computing power" to non-Russian clients. Due to the lack of "clear explanations" in current regulations, enterprises face difficulties in reporting, and VAT may apply to real-time, monthly, or annual rental invoices.

2. Details of the New VAT Regulations in Russia

2.1 Legislative Process

On May 1, 2025, the Russian Ministry of Finance officially proposed a bill to impose VAT on cross-border mining services, marking a key step in the country's tax regulation of the cryptocurrency mining industry. The bill is currently in a public consultation period, allowing industry associations, enterprises, and the public to provide feedback on the terms. After the consultation period ends, it will enter the parliamentary review process. If the bill passes smoothly, it is expected to be implemented on January 1, 2026, along with amendments to Article 149 of the Russian Federal Tax Code to clarify VAT rules for digital currency-related transactions. To ensure a smooth transition, the bill sets an adjustment period for registered miners and infrastructure operators, while requiring electricity suppliers to separately report electricity consumption for cross-border mining to enable tax authorities to accurately distinguish taxable entities and avoid excessive disruption to energy basic services.

Current disputes focus on the scope of taxation: the energy industry association opposes including electricity sales in the VAT system, arguing that it is a basic energy service and its costs are already reflected in electricity pricing. In contrast, the Ministry of Finance argues that electricity is a core cost component of mining activities and should be included in VAT to comprehensively cover economic value. This disagreement may affect the final tax rate setting and compliance costs for related industries.

2.2 Legal Definitions and Registration Requirements for Industrial Miners and MIOs

As early as August 8, 2024, Russia clarified the legal definitions of industrial miners (промышленные майнеры) and Mining Infrastructure Operators (MIO). According to reports from the Russian state news agency ITAR-TASS, on August 8, Moscow time (UTC+3), President Vladimir Putin signed a law introducing new concepts such as digital currency mining, mining pools, mining infrastructure operators, address identifiers, and individuals organizing mining pool activities, and specifically defined the criteria for identifying industrial miners and MIOs, as well as the materials and documents required for registration.

Industrial miners (промышленные майнеры) refer to legal entities or individual entrepreneurs engaged in large-scale cryptocurrency mining activities, which typically involve high energy consumption and large equipment scale. Industrial miners must meet specific conditions:

(1) In terms of registration, they must be Russian legal entities or individual entrepreneurs and be included in the "Individual Register of Cryptocurrency Miners" managed by the Federal Tax Service (FTS);

(2) Regarding energy consumption, individual miners using household electricity for mining must ensure that their electricity consumption does not exceed government-set limits (the specific value is dynamically adjusted by the Ministry of Energy);

(3) In terms of compliance obligations, they must regularly report mining income to tax authorities and pay taxes based on income levels, with a 13% tax rate applicable to investors with annual income below a certain threshold (2.4 million rubles), while income above that threshold is subject to a 15% tax rate.

Mining Infrastructure Operators (MIO): refer to operators that specifically provide infrastructure and services related to cryptocurrency mining, including but not limited to the management of mining equipment and operation of data centers. The criteria for identifying MIOs are relatively strict, with entry barriers reflected in multiple aspects:

(1) In terms of licensing, they must obtain a "Mining Infrastructure Operator License" issued by the federal government, which is approved by a specialized committee under the Ministry of Digital Economy;

(2) In terms of service scope, they can provide services such as mining site hosting, data center leasing, and computing power sales, but are explicitly prohibited from combining these with core electricity industry businesses such as electricity transmission and scheduling;

(3) In terms of registration requirements, they must submit corporate articles, technical plans, electricity procurement contracts, and other materials to the Federal Tax Service;

(4) They must undergo annual compliance audits.

According to the registration requirements of the Federal Tax Service (FTS), industrial miners and Mining Infrastructure Operators (MIO) must submit a series of documents to complete compliance registration:

(1) Corporate entities must provide a notarized copy of the company articles, clearly including provisions related to industrial assembly or cryptocurrency mining business scope, along with a tax registration certificate and the main national registration number of the legal entity.

(2) If the applicant is an individual entrepreneur, they must submit personal identification documents (such as notarized passports) and the main national registration number of the individual entrepreneur.

Both individuals and enterprises at the operational level must provide a list of mining equipment, qualified electronic signatures for the equipment, technical parameters and energy consumption descriptions, as well as the digital wallet address used to receive mining income. Additionally, they must supplement the documents specified in Article 1 "a" of the Russian Federal Government Resolution No. 719 dated July 17, 2015, and include relevant documents for industrial product technical requirements, including technical conditions, corporate standards, process regulations, or national standards. This process aims to ensure that applicants meet technical access, tax compliance, and anti-money laundering regulatory requirements, with unregistered enterprises facing fines and legal risks.

2.3 Tax Elements of the New VAT Regulations

According to the draft proposal, the scope of VAT collection will clearly cover cross-border mining services, including renting mining equipment to overseas clients, providing real-time computing power services, and electricity supply (if the Russian Ministry of Finance's proposal is ultimately approved). In terms of tax rate standards, the draft bill sets a general rate of 20%, applicable to equipment rental income; at the same time, if the service recipient is an enterprise from a member country of the Eurasian Economic Union (EAEU), they can apply for VAT exemption and enjoy a zero tax rate benefit. Service providers applying for the zero tax rate must submit the "EAEU Customer Tax Registration Certificate" and "Service Use Declaration." Other tax rate references can refer to Article 164, Paragraph 1 of the Russian Federal Tax Code, which lists "zero tax rate for cross-border services." Regarding tax obligations, the draft bill stipulates that the taxpayer is the equipment/computing power service provider registered in Russia (including foreign company permanent establishments). If the equipment rental party fails to fulfill reporting obligations, the actual controller of the equipment (such as data center operators) will bear joint liability, paying VAT and related late fees.

The reporting cycle is divided into monthly and annual submissions, to be conducted by Russian service providers, who must submit cross-border service contracts, foreign exchange income proof, and other relevant materials to fulfill tax obligations.

(1) Monthly Reporting: Generally, a VAT return must be submitted, along with a notarized bilingual (Russian and English) cross-border service contract and foreign exchange income bank receipts (proof of ruble/foreign currency receipts). If applying for a zero tax rate benefit for clients from EAEU member countries, a valid tax registration certificate must be attached.

(2) Annual Reporting: Completing annual filings generally requires submitting detailed records of the duration of equipment usage by overseas clients or computing power output data (measured in TH/s·day) in the equipment usage log.

It is important to note that all the above reporting documents must be submitted with an electronic signature certified by the Federal Tax Service (FTS), and computing power services must be strictly measured daily and matched with contract pricing terms.

3. FinTax Perspective

There is intense debate within Russia regarding the new VAT regulations, with some supporters of the proposed regulations arguing that the new rules have two main benefits. From the perspective of policy linkage, the regulations requiring all cryptocurrency mining businesses in Russia to register at the beginning of the year enable tax authorities to comprehensively grasp the industry's equipment stock data. This move is significant as it not only provides regulatory authorities with a clear understanding of the industry scale but also offers precise targeting for VAT collection. Through registration information, tax authorities can clearly identify taxable entities, understand the number, scale, and operational status of enterprises' equipment, thereby effectively implementing the new VAT regulations and ensuring that taxes are fully collected.

From the perspective of government revenue, the implementation of the new VAT regulations will bring considerable fiscal income to the Russian government. The Ministry of Finance estimates that VAT could increase annual revenue by 45-60 billion rubles. This funding is of strategic importance to the Russian government and will primarily be used to subsidize domestic electricity infrastructure upgrades. The cryptocurrency mining industry is a high-energy-consuming sector that requires stability and quality in electricity supply. Upgrading electricity infrastructure can improve the efficiency and reliability of electricity supply, reduce electricity costs for enterprises, and thus provide better support for the development of the cryptocurrency mining industry. Additionally, from a macroeconomic perspective, this fiscal revenue can also be used in other areas of public welfare, such as education, healthcare, and social security, improving people's living standards and promoting sustainable economic development. At the same time, through the implementation of the new VAT regulations, the Russian government can also guide the cryptocurrency mining industry towards a more standardized and legal direction, promoting healthy and stable industry development and contributing to the transformation and upgrading of the national economy.

Meanwhile, the draft regulations also face many opposing voices. Opponents argue that the implementation of the new VAT regulations will lead to an increase in tax burden in the short term, which may cause some small and medium-sized industrial miners and MIOs to exit cross-border business due to the inability to bear the increased costs. These small and medium-sized companies are usually smaller in scale and have weaker financial strength, making it difficult to maintain normal operations and profitability in the face of higher tax rates. Their exit will accelerate industry consolidation, with market share further concentrating among large industrial miners and MIOs. While this concentration of market share may improve overall industry efficiency and competitiveness to some extent, it is not entirely beneficial for the ecological balance of the entire mining market.

In the long term, the industry's trend may be even more severe. Leading industrial miners and MIOs, in search of lower costs and higher profits, may relocate their data centers to low-tax countries such as Kazakhstan. These countries may offer more favorable tax policies and electricity prices, attracting relevant personnel. Once leading industrial miners and MIOs migrate on a large scale, Russia's share of computing power may decline, and computing power is the core competitiveness of cryptocurrency mining. A decrease in computing power share means that Russia's voice and influence in the global mining market will be weakened, potentially affecting its technological development and innovation in this field.

We believe that the following aspects should also be considered regarding the new regulatory draft. First, there is a dispute over the classification of tax items; the Russian Ministry of Finance and the tax authorities have yet to reach an agreement on whether mining services should be taxed at a rate of 20% as "equipment rental," and this is still in the draft stage. Second, the issue of missing cross-border transaction certificates is severe, with over 60% of mining enterprises unable to provide tax payment certificates stamped by overseas clients, leading tax authorities to refuse input tax deductions. Additionally, the problem of energy cost allocation also needs urgent resolution, as electricity expenses account for a significant portion of operational costs, but current regulations do not clarify the VAT deduction ratio for electricity procurement invoices.

Despite the controversies, overall, this remains a beneficial attempt by Russia to promote the transformation of its cryptocurrency policy and the healthy development of the cryptocurrency market. If the relevant reforms are ultimately implemented and achieve good results, Russia may expand the reforms to more subfields, continuously guiding the development of its domestic cryptocurrency industry while safeguarding national interests.

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