President of Kazakhstan Kassym Jomart Tokayev signed into law a bill to amend the country’s Tax Code in order to impose higher taxes on crypto miners. The amount of electricity used in extracting digital currencies such as bitcoin will determine the levy.
Kazakhstan’s President Tokayev has signed new legislation that introduces changes to the country’s law “On Taxes, Other Mandatory Payments To the Budget” as well as supplementary legislation to enhance the Tax Code’s implementation. These amendments provide cryptocurrency mining with differentiated tax rates.
Based on the average price for electricity used to mint coins over a given tax period, the exact levies will determine the exact amount. They begin at 1 Kazakhstani Tenge (approx. At the time of writing, they are $0.002 per kilowatt hour (kWh). A miner can pay 25 tenge or less ($0.053) per an kWh. 10 tenge is possible if the electricity tariff was between 5-10 tenge ($0.011-$0.21).
The tax rate for crypto farms that use electrical energy from renewable sources is 1 tenge per Kilowatt (kWh), regardless of the cost. The surcharge came into effect on January 1, 2022 after the Central Asian country experienced a growing power shortage over the past year. The shortages were caused by the influx crypto miners, which followed China’s May 2021 crackdown on the industry.
Government announces new tax rates to reduce load on nation’s power grid
Kazakhstan attempted to restrict cryptocurrency mining by imposing restrictions in electricity supply during winter months, and closing down coin-mining facilities throughout its regions. Some companies were forced to move to other mining hotspots, or to move large amounts of their equipment outside of the country by these measures.
In February, President Tokayev directed the relevant authorities to identify all cryptocurrency miner operating in Kazakhstan and increase their taxes. State auditors pursued mining companies that allegedly took advantage of tax benefits they weren’t supposed to receive.
The government of Nur-Sultan made the announcement that it was planning to raise the tax burden on miners. One of its initial proposals was to tie this new rate to the price of the newly minted cryptocurrency. Official statements state that the new tax rules will reduce the demand for electricity from the country and increase the load on the grid.