The topic of cryptocurrency and taxes is relatively new from the point of view of taxation in Estonia and despite the fact that crypto assets are not specifically mentioned anywhere in Estonian tax legislation, they are regulated by ordinary tax rules, because the company’s turnover is taxed. This means that it is legal to trade, own and store crypto assets in Estonia.
NFT is the same asset as other cryptocurrencies. The only difference is that it is not necessary to use the FIFO method or the weighted average method, because NFT is distinguishable, and the value of the acquisition and the cost of selling each particular crypto of the asset is known. According to the Estonian Tax Department, The tax exemption on movable property does not currently apply to the NFT because the Estonian Tax and Customs Department considers that the NFT cannot be used for personal purposes, but this may change in the future.
The sale of NFT tokens is an electronic service subject to a value-added tax. The VAT rate is 20 per cent or 0 per cent, depending on the specific situation. It is important to bear in mind that taxation arises only when a company is registered as having a sales tax obligation. Obligation to register as a sales tax liability arises when the company is liable for a turnover of 40,000 euros from the beginning of the calendar year. Please note that sales tax payers can register before reaching a turnover of €40,000.
In order to find out at what rate the sale of NFT tokens will be charged, we recommend you to contact our specialist for individual advice.
However, if NFT is sold to persons of another EU state who are not registered as liable for sales tax, and if the total turnover of all EU countries by such legal persons has reached 10,000 euros, it is either necessary to register as a sales tax liability in each of the states where the partner is operating, or to register in Estonia as a sales tax liability and join the OSS system.
How do companies declare taxes on cryptocurrency?
VAT tax returns are filed every month up to the 20th day with the Estonian Customs Department.
The profit from the sale of NFT to the Estonian Company is taxed only if it is distributed. As long as these funds are not withdrawn from the company through dividends or any other means of distributing profits, the transaction is tax-exempt.
Also, if in the case of the business of the Estonian Company, some transactions are profitable and some are unprofitable, when filing the declaration the company can account for losses, thereby reducing the tax burden. As long as the company does not distribute dividends, no tax is levied. Income and social tax returns are filed before the 10th of each month.
In addition, income tax may be levied, for example, on special benefits or on payments and expenses not related to the business of the company, as well as in case of expenses for gifts and donations and for reception of guests and business partners.
How do individuals declare taxes in cryptocurrency?
Individuals in Estonia file their tax returns once a year. No other interim declaration is required by tax legislation. The annual declaration should state:
- Transaction date
- Purchase price
- Sale price
Only transactions that make a profit are declared, and the tax rate is always 20 per cent. Loss-making transactions are not counted. It is also important to note that crypto assets are not equities, which means that an investment account cannot be used to delay any tax claims, as crypto assets do not fall within the legal definition of shares/securities.
For detailed advice on the taxation of NFT tokens in Estonia, we recommend contacting the accountant or tax consultant of Company in Estonia OÜ.