Estonian Tax and Customs Board maintains transparency in the cryptocurrency user environment and identifies individuals and businesses that do not conduct their business in an honest manner. Since most cryptocurrency transactions are cross-border, it is international cooperation that is becoming an essential part of information-sharing in the area of cryptocurrency risk.
Customs Board can determine a tax amount with a retroactive effect for a period of three years and, in the case of a deliberate non-payment of the tax amount, up to five years. In addition, it should be borne in mind that an intranet would be added to the unpaid taxes. It should also be noted that the presentation of false data in the tax return is a misdemeanour for which an individual can be punished with a fine of up to 1,200 euros and a commercial association – up to 32,000 euros.
If the false data is presented with the purpose of reducing the tax obligation and there is a concealment of a tax obligation of 40,000 EUR or more, it is a tax crime, for which a monetary penalty or a prison sentence of up to five years is prescribed. The penalty for concealing a tax obligation of more than 400,000 EUR is one to seven years’ imprisonment.
Cryptocurrency taxation for individuals in Estonia
Virtual currency is treated as property within the meaning of Clause 1 of Article 15 of the Income Tax Act. Income tax shall only be charged on gains (Article 37) from the sale or exchange of transferable and monetarily appraisable objects (Clause 1 of Article 15 of the Income Tax Act). In other words, profits received from the disposal of virtual currency, including exchange, is subject to income tax. The gain or loss on the sale of property is the difference between the purchase cost of the property sold and its sale price. The gain or loss on the exchange of property is the difference between the purchase cost of the property transferred in exchange and the market price of the property acquired through exchange (Clause 1 of Article 37).
It is necessary to record the amount of fiat money received and the amount of cryptocurrency assets acquired during each month. All the company’s cryptocurrency assets shall also be recorded in terms of euros on a monthly basis.
Cryptocurrency taxation for legal entity’s in Estonia
There is no specific tax on cryptocurrency for the Estonian companies. Crypto businesses follow the same rules as other types of companies in Estonia.
Taxation of Estonian companies is the most profitable in the European Union.
There is 0% corporate tax in Estonia. The tax on dividends or tax on profit distribution is 20/80. The tax rate for paying dividends is 25%. To pay dividends, a member of the company’s Management Board will need to make a profit statement for the current period.
The Estonian VAT rate is 20%. Companies are obliged to register a VAT number in a case when sales in Estonia exceed 40,000 EUR from the beginning of the calendar year. A company can also apply for VAT registration before this threshold value is reached.
Wisor Group OÜ offers accounting services for companies engaged in crypto-activities. It is important to bear in mind that cryptocurrency transactions are not subject to VAT.