As the bitcoin (BTC) rate first reached a record $ 64,000, and then fell by almost half, more and more Belarusian companies wondered: is it possible and necessary to invest in cryptocurrency? And if so, what taxes will you have to pay and what pitfalls should you be aware of? Experts talk about the peculiarities of investing in crypto for legal entities FREE2EX…
Cryptocurrency regulation in Belarus
At the end of 2017, Decree No. 8 “On the Development of the Digital Economy” legalized cryptocurrencies and operations with them on the territory of Belarus. In addition to Decree No. 8, a number of important documents were adopted – in particular, Requirements for the crypto platform operator and Requirements for the rules of internal control.
Thus, the foundation of the legal framework was created for the operation of crypto-exchanges, exchangers, organizers of ICOs, IEOs.
ICO (Initial coin offering) – a form of attracting investments in the form of selling to investors a fixed number of new units of cryptocurrencies received by a one-time or accelerated generation. There is also a form of “initial token offer”. In addition, the term ICO is often replaced by the word “crowdsale”.
IEO (Initial exchange offering) – a variant of the ICO, held under the control of a cryptocurrency exchange service.
However, we still have a rather long process of creating comprehensive regulation, when the clients of such platforms will no longer fear that one day they will disappear along with their money. Everything goes to the fact that questionable or fraudulent platforms simply will not be able to meet the requirements of the law.
Nevertheless, the purchase of bitcoins by ordinary citizens is one thing, but corporate investments and the issuance of tokens by legal entities is quite another: the control is tighter, and the risks in case of violations are higher.
Belarusian companies are still wary of cryptocurrencies, because they do not really know what is allowed, what is prohibited, and how to generally account for such assets on the balance sheet. Below we have tried to provide detailed answers to the most common business questions on this topic.
Can companies invest in crypto in Belarus?
The short answer is yes, it is allowed, and yes, it is an attractive way to invest. Legal entities can purchase any digital signs – Bitcoin, Ethereum, altcoins, stablecoins, corporate tokens of Belarusian and foreign companies, etc.
Theoretically, legal entities have access to the same sources of income from cryptocurrency as ordinary people: selling on an exchange with a profit, placing in staking and liquidity pools, etc. However, to carry out operations, companies can only use those sites that are registered as operators of crypto platforms and organizers of ICOs. You can check it here.
That is, a legal entity cannot, for example, send cryptocurrency and tokens to a pool on a decentralized exchange or buy tokens of a new project on an unregulated exchange like Binance or KuCoin.
Arthur Kosciuszko comments:
“Decree No. 8 (as amended on 03/18/2021)” On the development of the digital economy “determined that activities related to the acquisition and (or) alienation, including the exchange of tokens, is illegal and entrepreneurial activity is prohibited if it is not carried out through residents HTP – crypto platform operators, cryptocurrency exchange operators “.
How to keep records of cryptocurrency?
The National Accounting and Reporting Standard “Digital Signs (Tokens)” has been in effect in Belarus since March 28, 2018. He indicates how exactly to accept tokens for accounting, depending on the purpose for which and how the company acquired them:
- Purchased on a crypto exchange for the purpose of subsequent sale
- Purchased so that you can use the rights that are “hardcoded” in the token (for example, interest income from corporate tokens)
- Received as a reward for mining or confirming transactions on the blockchain (this also includes staking income)
- Received as payment for services.
Each item has its own accounting entries. In addition, it matters how much time has passed since the placement of the tokens.
The national standard also establishes the rules for accounting for funds received by a company when selling tokens, whether it be a cryptocurrency previously purchased on an exchange or mined.
Of course, for each operation with tokens, a primary accounting document (PUD) must be created. This stops many entrepreneurs: they are not sure if they can get the necessary information from the crypto exchange operator. In fact, all regulated Belarusian crypto platforms provide supporting documents without any problems.
Karina Kardash explains:
“I’ll tell you how it works, using the example of the FREE2EX crypto exchange. With us, every registered and fully verified user (including a legal entity) can receive a confirmation document on the purchase or sale of cryptocurrency.
This document looks like this: the manager unloads the history of account transactions from his personal account, certifies it with a seal and signature. Usually a scan is enough, but if necessary, the original is sent – this is decided by the support service individually with each client.
Looking at this document, the tax office sees how much the client received from operations with tokens on the crypto exchange. “
What will be the taxation of companies’ income from cryptocurrency?
If an organization sold BTC for USDT (dollar stablecoins) on a crypto exchange and made a profit, then it will not have to pay tax. But when a legal entity exchanges the received USDT for fiat money (Belarusian rubles, dollars, etc.), then it will be necessary to pay income tax.
Best of all, under the Belarusian cryptocurrency legislation, “physicists” live.
They do not have to pay any taxes at all on income from operations with tokens until January 1, 2023. But a number of tax incentives also apply to legal entities before this date:
- There is no need to pay tax on profits received from the sale of some tokens for others, even if, in fact, the organization made a profit in cryptocurrency
- Similarly, under the simplified taxation system, the proceeds from the exchange of some tokens for others are not taxed.
- The proceeds from the placement of own corporate tokens through the ICO organizer – an HTP resident are not subject to income tax
- Operations with tokens are not subject to VAT
- HTP residents are exempt from taxes on income related to cryptocurrency.
Can a company issue its own tokens?
Yes, and there are already several successful examples – in particular, a manufacturer of detergents and a retailer. Such tokens are similar to corporate bonds: the company attracts funding, and in return pays the token holders regular income.
In one of the examples mentioned, the issue size was $ 500,000, and the rate of return was 10% per annum with monthly payments over two years. Moreover, the buyers of tokens can, if they wish, return the funds ahead of schedule in six months. The second company issued tokens for $ 3 million and € 3 million at 5% per annum for a period of three years.
Note! The company cannot issue a token on its own: you need to contact the organizer of the ICO – a resident of the HTP (Hi-Tech Park). A foreign company – for example, a Russian one – can also order a token emission (ICO) service in Belarus. The main thing is to act through a registered crypto platform operator – an HTP resident.
A typical ICO plan is shown below.
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Is the game worth the candle
With a well-thought-out strategy and correct accounting system, investments in cryptocurrency can become a good source of income for a company. On average, professional traders earn 100% per annum.
However, we emphasize that everything depends on the chosen strategy. She can be conservative or she can be aggressive. At the same time, the crypto exchange does not guarantee the result. Of course, investing in such volatile cryptocurrencies comes with significant risk. But there are also more conservative instruments – for example, investments in tokenized stocks, ETF (Exchange-traded fund – exchange-traded fund), gold and other traditional assets in tokenized form.
In fact, the business invests in tokens and enjoys all the advantages and benefits of Decree No. 8. And in fact, it invests in American and European stocks, indices like the S&P 500, oil, gold and so on without hindrance and without a headache. Owners, financial managers and treasurers can safely dispose of free money by investing in this way.
Read also: From staking to smart contracts: what’s happening to the blockchain industry
In addition, the issuance of their own tokens opens up fundamentally new opportunities for companies to develop their business.
Alexey Korolenko comments:
“So far, all corporate tokens in Belarus are a simple debt instrument, an analogue of bonds. The advantage of debt tokens over bonds is that they can be pegged to a hard currency, primarily the US dollar. However, in reality, a whole arsenal of options is available to business: for example, you can release:
– internal settlement token for the holding, which will facilitate the movement of money and reduce the cost of settlements within the group
– a token for a loyalty program, which will reflect all its nuances and complexities of calculation and add gamification to customer relationships
– a utility asset that will allow you to tokenize goods and services.
And there are a lot of such options. “
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Despite the fact that the legal status of cryptocurrencies in Belarus was settled more than three years ago, they remain an unusual and even suspicious tool for business. In many ways, we see the fault of the media here, which focuses on volatility, the closure of unregulated exchanges in different countries and other controversial aspects of the crypt.
However, this hype should not overshadow the main thing: the huge potential of cryptocurrencies as an investment vehicle for business. A number of Belarusian companies have already realized this, it remains to be hoped that hundreds of others will follow.
In addition, in accordance with the Decision of the Supervisory Board of the Park of High Technologies, Belarusian legislation obliges in materials on the topic of crypt to make such a disclaimer:
“Activities related to transactions (operations) with tokens are associated with a high level of risk of complete loss of funds and other objects of civil rights (investments) transferred in exchange for tokens. The legal regulation of transactions with tokens does not have a uniform approach, and the consequences of such transactions may have different legal assessments in different states. “