Mining in Russia: benefits, risks and tax optimization

Investments in Bitcoin mining are growing on the eve of the Bitcoin halving — both in the world and in Russia, say market participants surveyed by Bits.media. We explain what the profitability and risks are, how mining taxation actually works in the Russian Federation, how to optimize cryptocurrency mining in different forms of legal entrepreneurship.

Efficiency of investments in production

Since the beginning of 2023, global Bitcoin mining difficulty has increased by approximately 76.6% to an all-time high of 62.46 trillion.. The total computing power of the network reached 449.68 Eh/s. According to the mining company Bitriver, the Russian Federation is now second in the global mining market, right after the USA. Russian miners consume about 1.5 GW of electricity. By 2026, growth to 5 GW is expected and new 1.5 million miners will be deployed across the country, predicts Bitriver founder and CEO Igor Runets. In his opinion, the industry has already matured, strengthening financial and digital independence.

But how profitable is cryptocurrency mining?

“Now it’s profitable,” says Vitaly Borshchenko, CEO of the Russian mining company BitCluster.. — After all, what determines the effectiveness of investments in mining? Main factors: equipment cost, maintenance costs, electricity costs, operational stability. Nowadays, equipment prices, with the right approach, allow you to quickly recoup your investment. The high dollar exchange rate plays into the hands of investors who place equipment in the Russian Federation and pay for electricity in rubles.”

Let's check the profitability of mining in practice

Let's calculate the annual profitability for the MicroBT Whatsminer M50 122TH/s miner, which is sold by Russian dealers of equipment manufacturers from China.

The unit price is 208,000 rubles ($2,178).

Hashrate — 122 TH/s.

Power — 3,600 W/h.

Cryptocurrency — BTC.

The average electricity tariff in the Russian Federation kWh is 4.9 rubles ($0.05).

To calculate the annual profitability of the device, we use a mining calculator. It will allow you to calculate the actual profitability based on the input parameters.

Calculation of mining on one device.

The return on investment (ROI) for the first years will be 56.39%. This is the return on investment in mining according to current calculations. With ROI=100%, income will be equal to equipment and operating costs. This means the investment has paid off.. If the ROI is above 100%, the miner will earn a net profit.

By September 2024, the profitability of Bitcoin mining could reach 56.39% of the invested funds, follows from calculations made together with Bits.media interlocutors from among market participants. By 2025, all investments in the purchase of equipment will pay off, and the net profit will reach somewhere around 12.78%.

Compare with the profitability of traditional instruments

Let's compare the average annual return on investments in traditional assets (stocks, real estate and bank deposits) with the profitability of Bitcoin mining.

Shares of Russian companies

Over the past five years, the average return on shares of the top 10 Russian companies that consistently pay dividends was 12.62%.

Let's calculate the average dividend yield of shares for 12 months using the known average annual yield for five years:

D12 = (1 + D5)^(12/60) — 1

Where:

D12 — average dividend yield for 12 months.

D5 — average annual dividend yield for 5 years.

Let's raise 1 + average annual return to the power of 12/60 (since 12 months is 1/5 of 5 years). Then subtract 1 from the result obtained.

In our case, the average annual dividend yield for 5 years was 12.62%, then:

D5 = 0.1262

D12 = (1 + 0.1262)^(12/60) — 1 = 0.1022 = 10.22%

Thus, based on a five-year average annual dividend yield of 12.62%, the average 12-month dividend yield would be approximately 10.22%. The average price of each of these 10 shares for the year was 124.5 rubles.

Real estate

The return on investment in closed-end real estate mutual investment funds (CLIF) is higher than the return on purchasing real estate and renting it out. In the first case, you can earn 16.4%, in the second — 10.7%, realtors calculated. Therefore, let’s take for comparison the profitability of closed mutual funds. The average return on exchange-traded closed-end real estate mutual funds over the past 12 months was 11%. The cost of one share (closed-end mutual fund) in 2023 is 3,350 rubles.

Bank deposits

The average rate on savings accounts in the top 10 Russian banks is 6.38% per annum for existing clients, according to autumn data from the Financial Services project of the Moscow Exchange.. The average deposit in Russian banks reached 301,000 rubles, according to the Deposit Insurance Agency (DIA). .

Name of asset Average entry threshold RUB Average annual return % Risk level Shares 1 share = 125.4 10.22 Average closed-end real estate mutual fund 1 share = 35,001 11 Average Average bank deposit 301,000 6.38 Low Mining for 1 unit MicroBT Whatsminer M50 208,000 56.39 High

When choosing investments, it is important to conduct a risk analysis for each asset. For cryptocurrencies, stocks and funds there is an opportunity to reinvest income. There is no such option for deposits. Fees and taxes can significantly reduce the real return of any asset.

What happened? The profitability from one miner is significantly higher than the profitability of stocks, real estate or bank deposits, but profits will be earned only in two years, and not now, at the end of 2023 and the beginning of 2024. Is there a way to speed up the process?

We assemble a farm of 10 miners

Companies that sell and host mining equipment encourage customers to include as many devices as possible in a mining rig. In their opinion, the more equipment, the higher the profitability from production. Let's check how close this statement is to the truth now.

Let's assemble a mining farm of 10 MicroBT Whatsminer M50 miners and calculate its profitability for the year:

Calculation of mining on ten devices.

Mining bitcoins using ten miners should allow you to return your investment in the first year and make a profit of about 38%. According to calculations, Bitcoin mining using ten miners is more profitable than using one piece of equipment. But prepayment for a dozen miners at once is a serious expense not only for individuals, but also for small/medium businesses. Understanding this, device sellers offer to lease equipment. How beneficial is this for Russian business?

Leasing during Bitcoin's rise

Leasing is a rental with subsequent transfer of ownership. Leasing mining equipment allows you to purchase a liquid investment asset, reducing the initial acquisition costs. On the Russian mining equipment market, companies offer leasing on the following terms.

Company Down payment, % Leasing term, year Rate, % BitCluster 20 3 12 Intelion Data Systems 35 13-24 10.2 Chilkoot 10-30 3 20-25 price increases over three years Mining Group 20 3 annual leasing price increase by 7.4 Average market supply 25 3 10

Let's compare leasing with an advance payment for a farm assembled from MicroBT Whatsminer M50 122 ASIC miners, where the average cost of one device is 208,000 rubles.

Let's calculate how many MicroBT Whatsminer M50 122TH/s ASIC miners can be purchased for 624,000 rubles with prepayment:
624,000 /208,000 = 3 units of equipment

With leasing with an initial payment of 25%:
624,000 / (208,000 x 0.25) = 12 miners

In total, with the help of leasing it is possible to purchase 12 manners, and with an advance payment only 3.

We will calculate the overpayment for equipment for three years.

Equipment cost: 12 x 208,000 = 2,496,000 rubles.

Down payment: 2,496,000 x 0.25 = 624,000 rubles.

Interest for three years: 2,496,000 x 0.1 * 3 = 748,800 rubles.

Total overpayment: 748,800 rubles.

The total investment over three years will be:

down payment: 624,000 rubles;

interest for 3 years: 748,800 rubles;

total: 624,000 + 748,800 = 1,372,800 rubles.

In short, leasing leverage can help increase procurement potential by significantly increasing computing power and profitability.. Let us remind you that according to calculations, the operation of a farm of 10 miners in the first year can bring the owner a profit of more than 38%. At the same time, leasing more than doubles investment in mining.

Based on calculations, increasing the number of miners and leasing equipment increases profitability. But is it legal for a business to engage in mining when there is no transparent regulation of the industry?

Legality and taxes

Today, mining in Russia is outside the legal framework — there is no prohibition, but there are no clear rules. This reduces investment attractiveness. Legitimate businesses need clarity on taxes. All that remains is to use legally purchased equipment and electricity.

There is no special taxation procedure for mining. General rules apply. Storing and purchasing cryptocurrency is tax-free. The tax is taken from income from transactions with it.

Profit from mining is taken into account upon the sale of crypto assets for real money. What is important is profit in rubles or other currencies. You have to pay tax when you sell cryptocurrency on an exchange. For legal entities this is 20% of profit.

VAT is not paid, since cryptocurrency is not a commodity. Yes, the tax calculation procedure is not entirely clear. The basis is determined from general principles. General liability for tax evasion. These are fines, and for large amounts — criminal penalties.

To summarize: taxation of mining in Russia does not have special rules. It all comes down to general principles and calculation of the tax base.

What benefits can you claim?

Mining in Russia is not formally recognized as a legal business, and cryptocurrencies are not legal tender.. Therefore, the state does not provide tax benefits to miners. But in practice, entrepreneurs use mining to optimize taxation — they reduce income tax and VAT.

Equipment is accounted for as a fixed asset with a period of three to five years.. This allows you to apply accelerated depreciation and minimize the income tax base by 20% and deduct VAT on purchases.

How can you reduce your income tax?

Registration of a mining farm as an OS opens access to accelerated depreciation. Due to it, in the first years, most of the cost of equipment is written off. And this reduces the income tax base. Posting miners through accounting as devices for scientific activities and/or leasing objects allows you to apply a maximum accelerated depreciation rate of 3.0. This makes it possible to write off up to 100% of the cost of equipment as expenses in one year.

It is worth noting that from 2023 the limit on the cost of fixed assets for accelerated depreciation has been abolished. Therefore, companies set their own threshold. The main thing is not to overestimate, so as not to overpay property tax. Source: FSB 2023, accounting of fixed assets.

After this, you need to choose a depreciation method : linear or non-linear. Then calculate depreciation monthly according to the selected parameters. Take it into account in expenses that reduce the tax base for profits.

Let's consider accelerated depreciation in practice. Let's imagine that we purchased a mining farm as an operating system and write off the costs of the equipment for income tax.

S (cost of equipment) — 1,000,000 rubles.

Gross profit for 3 years — 110% of the cost of the equipment.

R (income tax rate) — 20%.

The depreciation period is 3 years.

Acceleration factor — 3.0.

Calculation:

Gross profit for three years = 1,100,000 rubles (110% of 1,000,000).

NP1 (tax without depreciation):

1,100,000 * 0.2 = 220,000 rubles.
Depreciation = S / Term * K = 1,000,000 / 3 x 3 = 1,000,000 rubles

Taxable profit: 1,100,000 — 1,000,000 = 100,000 rubles.

NP2 (tax with depreciation):
100,000 * 0.2 = 20,000 rubles.

Savings in % = (NP1 — NP2) / NP1 * 100% = (220,000 — 20,000) / 220,000 * 100% = 20%.

In other words, under given conditions, the savings on income tax are equal to 20%.

How VAT savings work

Purchasing a miner with VAT and registering it as an operating system allows the company to deduct the incoming 20% VAT on the purchased equipment. To do this, a value added tax declaration is submitted to the tax office.. The amount of VAT that was paid to the supplier when purchasing the equipment is returned (deducted) from the company's budget.

Thus, the company reimburses from the budget the VAT paid when purchasing OS. This is provided for by the Tax Code of the Russian Federation. Such savings are possible for legal entities operating both under the general taxation system (OSN) and under the simplified taxation system (UST 15%).

Let's look at how this works with an example.

The cost of mining equipment with VAT 20% = 1 million rubles.

Cost of mining equipment excluding VAT = 1,000,000 / 1.2 = 833,333 rubles.

VAT amount = 1,000,000 — 833,333 = 166,667 rubles.

The company pays the supplier the full amount including VAT — 1,000,000 rubles.

Miners are placed on the company’s balance sheet as OS at a cost of 833,333 rubles excluding VAT.

A VAT return is submitted to the tax office. In this case, the company has the right to deduct VAT in the amount of 166,667 rubles. This amount of VAT is returned to the company from the budget.

Thus, out of 1 million rubles the company reimburses 166,667 rubles of VAT. This is a standard mechanism for VAT refund when purchasing OS.

If you purchase equipment on lease, then VAT is deducted from the advance payment in the month of payment and leasing payments monthly during the term of the contract. When purchasing electricity from a supplier with VAT, you can also make a tax deduction of 20% for the capacity used.

As you can see, tax optimization allows you to scale cryptocurrency production. Unfortunately, it is not available for all forms of business in Russia.

Which form of business is more profitable to mine?

In Russia today there are three models of entrepreneurial activity: self-employed, individual entrepreneurs and legal entities.

Let’s compare the positive and negative aspects of cryptocurrency mining in Russia for each format.

Legal entities Individual entrepreneurs Self-employed Pros Possibility of tax optimization 20% on profit and VAT

No income restrictions

Developed accounting and reporting

Low rate — 13% -15% for personal income tax

Opportunity to switch to a patent tax system

Simplified accounting

Payment of part of the profit for your needs without taxes

Minimum tax on professional income (NPI) — 4-6%

Minimum reporting

No fixed fees

Income up to 2.4 million is subject to NPA

Cons High tax rates

Complex cryptocurrency accounting

High risks of inspections and fines

Restrictions on VAT deduction

Few tax benefits

Difficulty in recording cryptocurrency income

Risks when withdrawing cryptocurrency

Impossibility of VAT refund

Income restrictions

No tax benefits

Complex cryptocurrency reporting

Each type of business has its own benefits and risks. If tax optimization is possible for legal entities, then individual entrepreneurs and the self-employed have low taxes. But what all formats have in common is the difficulty in accounting, reporting and transferring cryptocurrency to fiat. And yet, which business format is more suitable for mining?

“It is easier for legal entities to gain access to the best electricity tariffs, cheap liquidity for purchasing equipment and, as a result, achieving greater scale, which has a positive effect on efficiency,” BitCluster assures. “For self-employed people and individual entrepreneurs, the risks are not associated with mining as such, but with the conversion of digital assets into traditional ones due to the lack of regulation.”

Summarize

With a competent financial approach, mining can bring profit in the first year. The main thing is to correctly formalize the activity legally. This will make it possible to optimize taxation through accelerated depreciation and VAT refunds. And also avoid risks due to the uncertainty of the legal field.