The Cabinet of Ministers did not approve the law on the abolition of VAT on transactions with hybrid DFAs

The government rejected the State Duma bill on the exemption of hybrid digital financial assets (HFA) from VAT on issue, redemption and sale. About it reported Interfax, citing a source familiar with the process of discussing the initiative.

The abolition of VAT when selling hybrid DFAs may provoke the illegal use of transactions with this instrument when selling goods, services and works. Also, approval of the amendments proposed by the State Duma may lead to gaps in the technology of tax calculation if persons who are not included in the category of VAT payers participate in the resale chain, the Cabinet emphasized.

Hybrid DFAs include digital financial assets and digital utility (DRM). The authors of the bill proposed to exempt taxpayers from paying VAT when receiving payment for hybrid DFAs associated with the sale of goods, works and services. The document also noted that the tax should be abolished when transferring such tokens into the ownership of other persons.

Currently, the sale of digital digital assets is exempt from VAT, however, when selling digital rights that include digital digital assets and digital digital rights at the same time, the tax applies. In some cases, after such transactions you can get a tax deduction.

In the summer, the State Duma adopted a law exempting from VAT transactions on the sale to individuals of digital securities linked to precious metals. The relaxation was introduced because VAT on the sale of precious metal bars by banks to individuals has already been abolished from March 1, 2022.

The Law on Digital Financial Assets (DFA) came into force back in 2021, but the first operators for issuing such assets appeared only in 2023. The first issues of digital financial assets appeared on the Moscow Exchange at the end of September. The issuers of the pilot issues were the companies “Gazprom Neft” and “GPB factoring”. At the beginning of October, the trading platform informed Vedomosti that it had begun to explore the possibility of issuing digital financial documents for works of art.