New high tax rate for crypto miners in Kazakhstan, here’s why
Kazakhstan has imposed new tax rules on crypto miners, this new tax system will differentiate tax rates on crypto mining. This also includes crypto miners who use renewable energy resources. The President of Kazakhstan, Kassym-Jomart Tokayev, signed this law which will amend the tax code of the country.
The amount of tax collected will be tied to the amount and average price of electricity miners consume when mining cryptocurrencies like Bitcoin. There have been constant attempts to regulate crypto mining activities, including Bitcoin and other cryptocurrencies in Kazakhstan.
Along with the new law, it is intended to modify the current law “Of taxes and other mandatory payments to the budget” as well as the complementary law that aims to improve the establishment of the tax code. This new law imposed on crypto miners comes after the Central Asian country cracked down on crypto miners.
Crypto mining is a competitive field and uses the proof-of-work method (consensus mechanism). Through this method, you perform a verification and add a new transaction to the blockchain. Apparently, electricity usage tax rates in Kazakhstan start from 1 KZT (0.0021 USD) per kilowatt hour.
The tax on cryptocurrencies depends on the type of energy source used
The amount of tax collected as mentioned above will depend primarily on the average price of electricity that has been consumed to activate the digital asset during a given fiscal period. Taxes start at 1 Kazakhstani tenge per kilowatt hour (kWh).
The tax will also be calculated based on the source from which the energy is generated. Miners using renewable sources will be required to pay the lower tax rate of 1 tenge per kWh, regardless of cost.
A surcharge was also implemented on January 1 this year, after the country experienced a larger electricity deficit the previous year. The electricity shortfall has been attributed to a rise in the number of miners in the country after China cracked down on the industry last year.
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Energy Crisis and Change of Treatment to Crypto Mining
Kazakhstan’s climate, as well as resources such as coal mines, make it conducive to crypto mining. Previously, the country made up 18.1% of the global hashrate, making it the second country with the most miners. Many companies decided to start mining operations after the Chinese ban.
This has resulted in an increased load on the national power grid. It was then that the country began to limit mining operations, along with this it also introduced restrictions on the supply of electricity during the winter months.
For this reason, many mining activities have stopped in many regions. Some have even decided to leave the country and choose other places to mine coins.
The increased load on the power grid has forced the president and other authorities to raise taxes after locating and identifying miners across the country.
Earlier this year, state auditors began cracking down on mining operations that tried to evade taxes and tried to benefit from taxes they were not supposed to benefit from at all.
The increase in tax rates is intended to reduce the electrical load on the power grid by discouraging high consumption of electricity that was originally intended for domestic purposes.
Bitcoin was priced at $20,600 on the four-hour chart | Source: BTCUSD on TradingView
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Featured image from The Astana Times, chart from TradingView.com
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