Kazakhstan President Kassym-Jomart Tokayev has signed a bill amending the country’s tax code to impose higher tax rates on crypto miners. The taxation will depend on the amount and average price of electricity used to extract digital currencies like bitcoin.
Kazakhstan’s cryptocurrency miners will pay higher taxes
Kazakhstan’s President Tokayev has signed a new bill introducing changes to the country’s Law “On Taxes and Other Mandatory Payments to the Budget” and a supplemental law strengthening the implementation of the Tax Code. The amendments introduce a differentiated tax rate for cryptocurrency mining.
The exact tax will be determined based on the average price of electricity consumed to mint coins during a given tax period. If miners pay more than 25 tenge ($0.053) per kWh, it starts as low as 1 Kazakhstan tenge per kWh (about $0.002 at the time of writing) and can reach as high as 10 tenge if electricity prices range from 5 to 10 tenge ($0.011 to 0.021).
Cryptofarms that use electrical energy generated from renewable sources will pay the lowest rate of 1 tenge per kWh, regardless of their cost. That surcharge went into effect on January 1, 2022, after the Central Asian country suffered a growing electricity shortage throughout the past year. The shortage was blamed on an influx of crypto miners after China decided to crack down on the industry in May 2021.
New Tax Rates to Offload Power Grid, Government Says
Kazakhstan also tried to limit cryptocurrency mining, putting restrictions on power supply during the cold winter months and shutting down coin minting facilities across the region. This action forced some companies to relocate to other mining hotspots or move the majority of their equipment out of the country.
In February, President Tokayev ordered the relevant authorities to identify all cryptocurrency miners operating in Kazakhstan and raise their taxes; in April, the State Auditor pursued mining operators for allegedly abusing tax benefits they should not have received.
That month, the government in Nursultan announced that it was preparing to increase the tax burden on miners, and one of its first proposals was to tie the new rate to the value of minted cryptocurrency. According to an official statement, the new tax system is expected to level the load on the power grid and discourage the consumption of domestically produced electricity for mining.
Image credit: Shutterstock, Pixabay, Wiki Commons