Taxation of Private Person’s Crypto Earnings in Estonia

If you live in Estonia and earn money from virtual currency, here are some things you should know.

Taxation of Crypto Earnings in Estonia

The government responds to the rapid growth of cryptocurrency by implementing new regulations, even as more and more people invest in virtual currencies.

Investing in cryptocurrency in Estonia is commonly done through crypto exchanges. There are strict regulations governing the use of cryptocurrency in this country. You should first obtain a license, open a banking account, and follow other legal procedures with regard to crypto exchanges/funds.

The situation, however, needs to be viewed differently when we look at an individual’s income.

Accordingly, an individual’s income can be generated in several ways according to the Estonian Tax and Customs Board:

  • The price of virtual currency changes when it is bought, sold, or exchanged
  • A virtual currency is mined
  • Cloud storage capacity can be rented
  • The ability to receive salary in virtual currency

Investments in virtual currencies are taxed the same way as investments in traditional cash in Estonia. Taxing virtual income requires converting the purchase price, sales price, or income received into euros at the current exchange rate for the virtual currency on the date of receipt.

PURCHASE, SALE OR EXCHANGE

Virtual currency is considered property under subsection 15 (1) of the Income Tax Act. The transfer and exchange of virtual currencies are subject to income tax (subsection 15 (1) and 37 (1)).

So if a person earns income through cryptocurrency purchases and sales online, or from the exchange of cryptocurrency for other currencies, that individual is required to declare that income. In the case of an exchange, income is the difference between the price of a received property and the price of the virtual currency that an individual bought and sold.

The only transactions required to be declared are those that generated income!

MINING

In the case of a private individual who independently mines cryptocurrency and doesn’t pay income tax, his income must then be declared as business income and taxes paid.

Furthermore, an individual mining virtual currency continuously must register as a sole proprietor with the Business register. A sole proprietor is able to deduct expenses related to their business from their income when he or she is registered as a sole proprietor.

A business’ net income must be taxed, paid to social security, and contributed to a mandatory funded pension.

RENTING OUT THE CLOUD STORAGE CAPACITY

Rental income must be declared when a person rents out storage space on their computer. It is required by the government to declare cryptocurrency mining and renting out storage capacity as a business activity.

VIRTUAL SALARY

Prior to making employee payments, all employers in Estonia who pay salaries in virtual currency must convert them into euros and pay labour taxes.

Upon receiving a virtual currency service fee from a foreign employer, for example, for which income tax has not been withheld, the person must convert such income into euros at the current market price at the time of receipt of the cryptocurrency, and then declare it as business income. “Virtual currency can be used by employers to pay for various goods and services without generating additional tax obligations if taxes have already been withheld on the wages.” — Tax and Customs Board of Estonia.

VAT

VAT is not charged when exchanging virtual currency for traditional payment methods. A person who deals with cryptocurrency will not need a VAT number since he will not need to register one.

Accounting services for crypto companies are provided by Service.