How to Report DeFi Yield in Ukraine: A Complete Tax Guide for 2024

Understanding DeFi Yield and Taxation in Ukraine

Decentralized Finance (DeFi) has revolutionized earning opportunities through yield farming, staking, and liquidity mining. In Ukraine, these crypto-generated profits are subject to taxation. As the State Tax Service (STS) tightens crypto oversight, understanding how to report DeFi yield in Ukraine is critical to avoid penalties. This guide clarifies your obligations under current laws.

Legal Framework for Crypto Taxation in Ukraine

Ukraine taxes crypto earnings under the Personal Income Tax (PIT) framework. Key regulations include:

• Tax Rate: 18% PIT + 1.5% Military Levy (19.5% total) on profits.
• Taxable Events: Selling crypto for fiat, exchanging between assets, or using crypto for goods/services. DeFi rewards (e.g., staking income) are taxed upon receipt.
• Exemptions: First UAH 100,000 (~$2,500) of annual crypto income is tax-free if declared properly.

The STS requires detailed transaction records, emphasizing transparency for DeFi activities.

Step-by-Step Guide to Reporting DeFi Yield

Follow this process to comply with Ukrainian tax laws:

1. Track All Transactions: Use tools like Koinly or CoinTracking to log:
   • Date and value of yield received (in UAH equivalent)
   • Wallet addresses and DeFi platforms used
   • Gas fees and transaction costs
2. Calculate Taxable Income:
   • Convert yield to UAH using the National Bank exchange rate at receipt time
   • Subtract allowable expenses (e.g., blockchain fees)
3. File Tax Declaration (Form 1-DF):
   • Submit electronically via the STS portal by May 1st
   • Report total crypto income in Section III.2.1
4. Pay Taxes: Transfer owed amounts by August 1st to avoid fines.

Essential Documents for Reporting

Prepare these records to support your declaration:

• CSV exports from exchanges/wallets showing yield transactions
• Proof of UAH conversion rates (National Bank archives)
• Receipts for deductible expenses
• Annual summary report from crypto tax software

Retain documents for 3 years post-filing.

Consequences of Failing to Report DeFi Income

Non-compliance risks severe penalties:

• Fines: 25-50% of unpaid tax amounts
• Interest Charges: 120% of the National Bank rate on overdue taxes
• Criminal Liability: For evasion exceeding UAH 1.1 million (~$27,500)

The STS uses blockchain analytics tools like Crystal Blockchain to trace undeclared income.

Best Practices for DeFi Tax Reporting

• Use Dedicated Tax Software: Automate tracking across wallets (MetaMask, Ledger) and chains (Ethereum, Solana)
• Separate Personal/DeFi Wallets: Simplify auditing
• Consult Professionals: Engage crypto-savvy accountants for complex yield strategies
• Declare Annually: Even if below the exemption threshold, filing establishes compliance

Frequently Asked Questions (FAQ)

Is DeFi yield taxable in Ukraine?

Yes. All DeFi rewards (staking, liquidity mining, airdrops) are taxable as income at market value when received.

How is DeFi yield taxed if I haven’t sold it?

Tax applies upon receipt, regardless of conversion to fiat. Example: Receiving $100 in ETH yield triggers ~$19.50 tax liability immediately.

What forms report DeFi income?

Use Form 1-DF for crypto earnings. Declare under “Income from Virtual Assets” (Code 180).

Can I deduct DeFi losses?

Yes. Capital losses (e.g., impermanent loss in LPs) offset gains. Document losses with transaction proofs.

When is Ukraine’s crypto tax deadline?

Declare by May 1st; pay taxes by August 1st annually. Late filings incur 10% fines.

Do I pay tax on borrowed crypto in DeFi?

No tax on loans, but yield from lent assets is taxable. Collateral liquidations may trigger capital gains/losses.

Disclaimer: Tax laws evolve. Verify details via the State Tax Service of Ukraine or a qualified advisor.