Investing in cryptocurrency in Estonia is common by starting a crypto exchange. Cryptocurrencies in this country are strictly regulated. A license must first be obtained, a bank account opened, and other legal procedures followed regarding crypto exchanges or funds.
In Estonia, crypto activity can take place in two different ways. In the following section, you will find information on Estonia’s crypto taxes.
INVESTMENT IN CRYPTO EARNINGS BY PRIVATE PERSONS
An individual’s income can be generated in several ways, according to the Estonian Tax and Customs Board:
- When buying, selling, or exchanging virtual currencies, the price of the currency may change
- A virtual currency is mined
- Cloud storage capacity is being rented out
- The receipt of a virtual currency salary
Estonia treats income received from virtual currency investments as traditional cash income and taxes it accordingly. The purchase or sale price as well as any received income or cost must be converted into euros at the exchange rate of the virtual currency ruling the market at the time of receipt.
Exchanges, purchases, or sales
Cryptocurrency gains are subject to Estonian taxes.
It is important for individuals to declare their incomes if they generate income from purchasing cryptocurrency, selling cryptocurrency online, or exchanging cryptocurrency for another kind of money, where the difference between what they sold and bought is the income, or, if they exchange, the difference between the price of a property received and the price of the virtual currency purchased. Taxation of cryptocurrency gains in Estonia
Mining
Private individuals who mine cryptocurrency independently and do not pay income taxes must declare their cryptocurrency income as business income and pay taxes on it.
Furthermore, a sole proprietor mining virtual currency continuously must register himself in the Business register. Private individuals who are registered as sole proprietors may deduct business-related expenses from their income.
Cloud storage capacity can be rented
Rental income is used to declare gains from renting the storage capacity of a private person’s computer. The income from mining cryptocurrencies and renting out storage capacity is regulated by the government if it is a business activity.
Currency-based salaries
The market price of virtual currency must be converted into euros by employers before paying employee salaries in Estonia.
Value Added Tax
VAT is not charged on the exchange of virtual currency for traditional payment methods. Cryptocurrency transactions also do not require a VAT number to be registered.
TAXATION OF COMPANIES
Cryptocurrencies are not subject to any specific tax. The laws governing crypto businesses in Estonia are the same as those governing other types of businesses.
Among European Union countries, Estonian companies are taxed the most profitably.
In Estonia, corporate taxes are 0%. Dividends are taxed at 20 percent and profit distributions at 80 percent. Dividend payments are taxed at 25%. Dividend payments require a profit statement to be prepared by a member of the company’s Management Board.
VAT in Estonia is 20%. Upon exceeding 40,000 EUR in sales in Estonia in one calendar year, companies are required to register a VAT number. It is also possible for a company to register for VAT before reaching this threshold.
If your crypto company requires accounting services, LKS Consult OÜ will be happy to help. Additionally, we are able to provide information regarding cryptocurrency taxation in Lithuania upon request.