Preparing for an Exam: How to Explain Cryptocurrency Purchases to the Tax Service

On August 4, Russian President Vladimir Putin signed a law on the first comprehensive regulation of cryptocurrencies in Russia. The document, which brings digital currencies into the Russian legal framework, aims to legitimize their circulation. The Federal Tax Service is also focused on this goal.

RBC previously reported that unemployed citizens purchasing expensive cars, yachts, and apartments have begun receiving letters from Moscow tax officials requesting explanations for their income sources. During the "analysis of the financial and economic activities of the unemployed working-age population of Moscow as part of tax control measures," data is requested regarding the correlation between income and large purchases.

Written explanations and documents confirming the receipt of income used to purchase real estate and vehicles are required. Tax consultants have also reported that similar requests are being received not only by Muscovites but also by clients from other regions.

Lawyers told RBC-Crypto what to do for those who made large purchases using income from cryptocurrencies and received inquiries from the Federal Tax Service. Experts explained what to be prepared for and how to act.

"This method has proven extremely effective"

Back in late 2020, the Federal Tax Service launched the analytical system ASK DFL, which automatically identified discrepancies between declared incomes and the property status of individuals, so it was only a matter of time before real claims would arise, said Kirill Soppa, head of the tax practice at the law firm GMT Legal. According to him, this system was primarily aimed at employers paying "envelope" salaries.

"Apparently, now it is the turn of affluent citizens with 'hidden' incomes. The same principle of identification applies here. This group now includes all citizens with income in cryptocurrency that the Federal Tax Service cannot see," Soppa said.

At the same time, the expert noted that the tax authority is limited by procedural frameworks—it cannot simply claim tax arrears based solely on program data; it must gather evidence of income receipt. The tax code does not allow for tax reassessment based on expenses: tax officials in Belgorod had previously attempted this, but the Supreme Court put an end to this practice, the lawyer added.

"Either the tax authorities hope to 'break' the court, or they are simply trying to intimidate—this so-called encouragement for voluntary clarification of tax obligations—this method has already shown extremely high effectiveness in working with buyers of 'paper' VAT," Soppa said.

For interaction with the tax service, he recommended involving experts in tax disputes who clearly understand the limits of the tax officials' powers and will not allow unnecessary reassessments. The only way for a "conditional student who successfully earned 100x on a meme coin and bought a BMW for ₽5 million" is to declare their income for the tax period and pay the tax on time; then there will be nothing to worry about, the lawyer believes. Other surveyed experts share the same opinion.

What the Federal Tax Service pays attention to

Moscow serves as a testing ground, but the methodology is already spreading to other regions, reported the legal agency Cartesius. It is important to understand that such a letter is not a verdict and not even a suspicion of a crime, but a standard request: tax officials see purchases in the databases of the State Traffic Safety Inspectorate and the Federal Registration Service, see declarations (or more often their absence), while observing account movements, explained Ignat Likhunov, head and founder of the agency. According to him, if the picture aligns, a person will not even know about the check, but if not, they will receive a request.

Red Flags: Purchasing, registering, and selling three or more expensive properties within six months, registering any vehicle for which luxury tax has ever been paid, having a monthly income exceeding 10 million rubles without confirmed personal income tax (PIT), as well as complaints from relatives, lovers, or former friends, explained a lawyer. He clarified that there would be no issues if you can prove that the money was accumulated from income of previous years for which taxes have already been paid, or if it is a gift from a close relative with appropriate declaration, or the sale of other property in the same tax period.

What Not to Do

The lawyer warned that the most common mistake is ignoring the situation. Letters arrive by registered mail, and failing to appear at the tax office when summoned gives tax authorities the right to calculate taxes by estimation, similar to past cases of this kind or market indicators, which almost always inflates the amount significantly. Challenging this assessment later can be very costly and time-consuming, said Likhunov.

Practical advice is as follows: If you have documents—loan agreements, gift agreements, sales contracts for old property, statements of savings for three to five years—simply gather them in a chronological folder. Do not write explanations by hand in the inspector's office; prepare a written response at home with a calculation of the movement of funds," said the expert.

He added that if the amount of purchases exceeds ₽30-50 million per year and there is no confirmed income, it is strongly recommended to hire a tax lawyer—dialogue with the Federal Tax Service (FTS) requires knowledge, experience, and the art of softening formulations.

Likhunov explained that large additional tax assessments are made against those who come empty-handed or start lying directly in the inspection. If you honestly explain the nature of the capital, for example, that it is old savings or the sale of a business three years ago, judicial practice is on your side, but preparation should be as thorough as for an exam, warned the lawyer.

According to him, stories of traders trying to explain multi-tiered schemes of their transactions between different exchanges and crypto services often boil down to the fact that tax is simply assessed on the entire income without considering expenses, and in the worst case, VAT related to entrepreneurial activity may be imposed.

Regarding large purchases from foreign sellers made directly in cryptocurrency, there is no direct prohibition on them, but the FTS fines such purchases by 20-40% of the amount, considering the payment made outside the bank, reminded Yuri Brisov, a partner at Digital & Analogue Partners. He noted that this is a legally vulnerable point and is contested, but one must be prepared for possible claims and judicial disputes.

In court, buyers of foreign assets are protected by three elements: the origin of the coins (purchased with cashless rubles, with statements), the tax paid, and a complete set of documents tracing the chain from the acquisition of cryptocurrency to the contract with the seller, Brisov explained. He clarified that tax is calculated as follows: transferring cryptocurrency as payment or selling it is considered the realization of property at a rate of 13%, while income is reduced by confirmed expenses for purchasing the coins, where it is impossible to undervalue the price: it will be compared with the market quotation, and income will be calculated as no less than the quotation minus 20%.

Liability for currency violations can be imposed within a two-year statute of limitations. If tax has not been paid, one should submit an amended declaration and pay the tax with penalties before the violation is recorded by the inspection, which exempts one from fines, says Brisov. However, if a fine has been issued under the currency article, it is advisable to go to court, added the lawyer.

<<Cryptocurrency is not considered a currency asset, and this must be proven in court based on completed transactions. Here we are talking exclusively about a direct and legal deal: transferring USDT to the account of a non-resident seller --- received an asset. If schemes for offsetting, illegal exchanges, intermediaries are used --- such transactions may fall under currency regulation>>, explained Brisov.

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Pressure will increase, as from July 1, 2027, buying and selling cryptocurrency for rubles will only be possible through intermediaries from the register of the Bank of Russia, says the lawyer. He reminded that banks will refuse transfers to unlicensed crypto services and added that exchanges have already turned into a source of data for the tax authorities.

<<The era of quiet cross-border payments is over, so it is important to bring documents for already verified transactions in line with the law and to take into account that transparency and monitoring activity is only increasing>>, concluded Brisov.

<> does not provide investment advice, the material is published solely for informational purposes. The opinions of experts are their own and may not coincide with the position of the editorial board. Cryptocurrency is a volatile asset that can lead to financial losses.

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