[vc_row][vc_column][vc_column_text]Income tax is divided into income tax on natural persons and income tax on enterprises (income tax on a legal person is also paid for permanent employment of non-residents and all employers providing unique benefits). In addition to paying the income tax on the enterprise, you are also obliged to withhold the employee’s payments and pay the income tax to the Tax and Customs Department as an employer.
Income of legal persons
The peculiarity of the income tax on enterprises in Estonia is that only distributed profits are taxed. If the profit is reinvested in the enterprise, it is tax-free. You must pay income tax on distributed profits, off-business income and benefits, on gifts, donations, admissions and special benefits provided to the employee. In addition, income tax is also levied on reducing an enterprise’s capital, purchasing shares or shares, and the payment of a liquidation dividend over monetary and non-monetary contributions to the enterprise’s capital.
Rates
The income tax rate for private person earnings— 20%.
The income tax rate of a legal entity applied to dividends of profits is 20/80. The income tax rate of a legal entity, which is applied to a regularly distributed profit dividend, is 14/86, and income tax is withheld at a rate of 7 per cent in addition to dividends paid to an individual.
The amount of income tax-free depends on the income received (up to EUR 500 per month and up to EUR 6,000 per year).
If payment is made in one month:
up to 1,200 euros, then tax-free income is 500 euros
between 1,200 euros and 2,100 euros, then tax-free income is applied in the amount calculated according to the formula 500 – 500 – 900 (1,200)
over 2100 euros, then the tax-free income is zero.
Individual entrepreneurs
If you conduct business as an individual entrepreneur, you must pay income tax on income from business activities, from which business expenses are deducted. The income tax rate for individual entrepreneurs is 20 per cent. The tax period is a calendar year; as an individual entrepreneur, you must declare income once a year. The tax return must be filed by 30 April of the year following the tax period.
If you have received taxable income for the previous period, you must pay the advance income tax by 15 September and 15 December. The advance payment is 25 per cent of the income tax calculated on business income in the previous tax period.
Income of employees
Personal income is also taxed. The person making the payments must withhold and pay income tax on the employees’ gross salary, additional fees, bonuses, holidays, and other benefits that are considered to be waged.
The personal income tax rate for 2021 is 20 per cent. A single, non-taxable income of €6,000 per year or €500 per month is applied to all earnings. The additional non-taxable income from pensions and compensation for industrial accidents is lost.
If the employee has submitted to the person making the payment (employer) a declaration of the application of the tax-exempt income, you may deduct the permissible tax-free income for the calendar month before calculating the withholding income tax.
In addition to the income tax, it is necessary to deduct from the income of the employee the payments for compulsory cumulative pension and payments for unemployment insurance. It is also necessary to pay a social tax on the gross salary of the employee.
[vc_row][vc_column][vc_column_text el_class=”padding”]Value Added Tax – VAT, levied on goods and services sold in business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. The final consumer pays Value-added tax.
Companies are obliged to register a VAT number 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.
If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
Obligations
As a sales taxpayer, you must:
When selling a good or providing a service, add a sales tax to the sales price
Keep a record of turnover tax
Calculate and pay the sales tax
Keep the documents relating to the transactions and issue the appropriate invoices
From the taxable turnover, you can deduct the turnover tax (turnover input tax) paid on the purchase of a good or service used for the purposes of the taxable turnover.
Rates
According to the Estonian regulations, the total rate of turnover tax is 20 per cent of the taxable value of the good or service.
For some goods and services, a tax rate of 9 per cent is applied, for example, in the case of books and workbooks used for teaching, periodicals, accommodation services and medicines noted by the Ministry of Social Affairs, Sanitary and hygienic products and medical equipment for personal use by persons with disabilities.
Some goods are subject to a 0% turnover tax, including exported goods, consultancy services rendered to a taxpayer from another EU Member State, and water and air transport used for international flights.
In the case of services, the 0% tax rate applies, for example, to services provided outside Estonia, various services related to water and air transport, and freight services. Various social goods and services are not taxed, such as postal services, insurance, health care and social services. You will find exhaustive information about the characteristics of the turnover tax rates and exemptions from this tax in the Sales Tax Act.
Declaration
The period for VAT taxation is a calendar month. You can file a value-added tax return and pay VAT to the Tax and Customs Board by the 20th of the month following the taxation period. The declaration can be submitted electronically at the e-Tax and Customs Board (e-MTA) if you have been a VAT payer for at least 12 months or by contacting the regional tax centre of the Tax and Customs Board.
VAT for FIE
As an individual entrepreneur, you must pay turnover tax if you are registered as a sales tax liability. As in commercial associations, the obligation to register arises if turnover exceeds 40,000 euros per year.
For you, as an individual entrepreneur, the turnover tax rates are the same as for business associations. If you, as an individual entrepreneur, keep cash accounting, you have the right to keep turnover tax records also on a cash basis, but this should be notified to the Tax Office Customs department when registering as taxable sales tax.
VAT refund
A VAT refund to a taxpayer in another EU Member State is carried out on the same grounds as a VAT refund in Estonia.
Claims for reimbursement must be submitted electronically through the tax authority of the country where the entrepreneur is located, which, in turn, sends an application to the Estonian tax authority.
VAT paid by a taxpayer of another Member State in Estonia when importing or purchasing goods or receiving services used for the purpose of doing business in the country of location of this person shall be refunded to the taxpayer of another Member State on the basis of an application by the taxpayer and in accordance with the procedure established by a regulation of the person responsible for this area minister if:
In the country where the taxable person is located, the taxable person has the right to deduct the provisional value-added tax paid on the import or purchase of goods or the receipt of services under the same conditions from the calculated value-added tax.
In accordance with this Law, Estonian taxpayers have the right to deduct the provisional value-added tax paid on the import or purchase of goods or the receipt of services under the same conditions from their calculated value-added tax.
The amount of value-added tax to be refunded is at least 50 EUR per calendar year, or at least 400 EUR if the application is submitted for a period shorter than a calendar year but covering at least three months.
Not allowed to refund:
VAT is related to the activities which are tax-exempt without the right of deduction.
VAT expenses that are limited in the member state of reimbursement.
Professionals from LKS Consult OÜ assist in registering VAT. Our assistance will include the following:
Preparation of the application based on information provided by the client.
Filing the application to the Estonian Tax and Customs Board in the presence of the applicant or digitally for e-Residency cardholders.
Assistance in answering additional questions from the Estonian Tax and Customs Board.
It is designed primarily to simplify everyday life for freelancers, business owners, international partners, and other non-residents who are connected to Estonia. Having an e-Residency in Estonia gives you access to the European Union, making it possible to start a business, expand your business, invest, and study there.
This national initiative aims to improve Estonia’s digital infrastructure and business environment as a result of efforts from numerous government ministries and institutions. The most important advantage of being an e-Resident of Estonia is that they have access to all the electronic services available throughout the European Union, not just in Estonia’s business environment.
With e-Residency, residents can access a wide variety of online services in Estonia, including banks and government portals. Creating and running an online company, based in the EU, is the primary motivation for applying. The opportunity for entrepreneurs to run their businesses remotely is now available to entrepreneurs across the globe.
It therefore makes it possible for foreigners to set up a company in Estonia through the online application process. The e-Residency programme facilitates entry into and investment into the Estonian market for non-Estonian citizens.
Many entrepreneurs have become successful in their business development in Estonia with an e-Residency, joining nearly 80,000 entrepreneurs already.
When it comes to attracting foreign entrepreneurs, e-Residency is crucial. By attracting talents and minds from around the world to Estonia, e-Residency has become the first digital nation for the world’s citizens.
TAXATION
Resident taxed in Estonia only on income received in Estonia is a non-resident taxed in Estonia only on income received in Estonia. An Estonian resident who does not earn any income in Estonia. A resident’s income or residency is taxed in the state where he or she resides or receives income, not in Estonia. Despite Estonia’s e-residency, other foreign countries are still subject to taxation.
Tax reductions and concessions from Estonia’s double taxation treaties can be used by non-residents to avoid double taxation. A residence certificate must be issued by the Estonian Tax and Customs Department after approval by a foreign tax administrator.
Estonian commercial associations founded by Estonians are registered in Estonia as Estonian commercial associations. Profits earned by an Estonian-based commercial association through a permanent place of business in a foreign country are not subject to Estonia’s income tax.
It is important to note, however, that a foreign state is not automatically exempted from its tax obligations when an Estonian commercial association has its primary place of business in that foreign state.
Even though a business based in Estonia is not subject to taxes in Estonia, it may still be required to file tax returns there. This form is used to declare income and social taxes, as well as the payment of contributory pensions and unemployment insurances, which is due on the tenth of the month following the month the payment was due. In the same form, various annexes specify the company’s tax obligations as well as the payee’s tax obligations.
Business registers need to be updated once a year with the gross per business year. A report that a business association submits to the Business Register can be accessed electronically by the Tax and Customs Department.
You should not wait to start your business in a small Nordic country. Join thousands of entrepreneurs who are doing so already. LKS Consult OÜ can provide assistance with company registration and tax advice as well.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text][/vc_column_text][/vc_column][/vc_row]
Estonia is a small country in Northern Europe that has built a digital society over a couple of decades. So far, the country with a population of less than 2 million is leading in the IT sector and is referred to as a 99% digitalized European country. Hence, unlimited tech opportunities have contributed to the fact that Estonia has drawn more and more attention as a prominent European entrepreneurial hub over the years.
or RIK (Estonian) is a government portal ruled by the Ministry of Justice. The main objective of RIK is to provide innovative services for public administration and law enforcement.
RIK develops and manages various registers and information systems. These include the Business Register, the e-notary, the Land Registry and information systems from other areas (court information system, e-files, etc.). About 50 registers are under the control of RIK. The Estonian Business Register has been in operation since 1 September 1995. The Estonian Business Register Internet portal is considered unique in Europe due to establishing a company quickly and conveniently. It is possible, for example, to register a limited liability company in a few hours using an ID card and even without leaving the house. In addition, the company portal allows not only searching companies but also modifying registration data and submitting annual reports electronically.
It contains legal and statistical data about all Estonian companies, non-profit associations, foundations, state and local governmental agencies and self-employed persons. The data of registry cards, the information about tax arrears and the simple data is available at no charge.
Possibilities:
Reviewing of a company’s B-card data, general data and tax arrears data
Making queries
Real-time monitoring of data and records
Confirming and verifying Estonian businesspeople’ business identities
Viewing annual reports, statutes, personal and commercial pledge data, etc.
New service available now.
Contractual customers can visualize all data of the e-Business Register. The visualization shows the relations between legal persons as an image.
The portal allows entrepreneurs to contact the registry offices of ships and helps the central Business Register carry out its functions. Using this portal, entrepreneurs can apply for membership, a list of board members with information about them and relevant changes, contact information, relevant changes and annual reports.
Every citizen can log into the Company Registration Portal and use the portal. Estonian residents can connect to the portal using an ID card, a mobile ID or an Internet bank. People in Portugal, Finland and Belgium can connect to the portal using an ID card, and Lithuanians can connect to the portal using a mobile ID.
Possibilities:
Registering a new company
Changing the data of a company
Notifying about the field of activities of a company
It is an online service linking 24 national business registers of Europe. The information system provides services in English, thus being accessible to the majority of interested persons. The service offers the possibility of searching companies, information about companies and their profiles.
Moreover, some countries provide additional information on companies, such as annual reports, company charters, balance sheets, income and expenditure reports, extracts from the Trade Register and annual income information. In order to benefit from this service, it is necessary to conclude a contract with the service provider in the country concerned.
Please don’t wait and join thousands of entrepreneurs basing their businesses in a small North European country. LKS Consult OÜ will be glad to assist you in registering and developing your company.[/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column][vc_column_text]The Estonian taxation system is one of the most profitable in the world. It includes state and local taxes. A tax is a financial obligation that the law imposes on a taxpayer and is enforceable in the manner, amount and duration prescribed by law. The taxpayer is obliged to pay only the state and local taxes prescribed by law.
State taxes enter into the country’s national budget. These are:[/vc_column_text][vc_row_inner][vc_column_inner width=”1/2″][vc_column_text]
[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_column_text]Local taxes are determined by the county or city assembly in accordance with the conditions laid down in the Local Taxes Act. These are:[/vc_column_text][vc_row_inner][vc_column_inner width=”1/2″][vc_column_text]
The income tax rate of a legal entity applied to dividends of profits is 20/80. The income tax rate of a legal entity, which is applied to a regularly distributed profit dividend, is 14/86, and income tax is withheld at a rate of 7 per cent in addition to dividends paid to an individual.
The amount of income tax-free depends on the income received (up to EUR 500 per month and up to EUR 6,000 per year).
The social tax rate is 33%. The monthly rate on which the minimum social tax obligation is based is 584 euros; respectively, the minimum social tax duty is 192.72 euros per month.
Social tax is levied to obtain the income necessary for State pension and health insurance, from payments made in the context of an employment or service relationship, from payments made in favour of a member of the management or control body of a legal entity, Payments made under a contract of obligations concluded for the provision of services to an individual, as well as special benefits and income tax paid from that place. In such cases, the payer of the social tax is the person who makes the payment, and the tax period is the calendar month.
Unemployment insurance rates: 1.6 per cent for the worker and 0.8 per cent for the employer.
The compulsory cumulative pension payment rate is 2 per cent.
In calculating the December 2020 payroll and other payments and calculating the taxes (payments) accrued/withheld, it should be borne in mind that taxes are calculated on a cash basis.
The income tax is paid by resident natural persons on their entire income, regardless of the place (state) where it was earned. Suppose a person wishes to have an income tax deducted from his or her salary or other income during a tax-free calendar year. In that case, he or she should present to the person making the payment, A free written statement to that effect. At the same time (during the same month), tax-free income for only one person paying (for example, the employer) can be counted.
A land tax is a state tax paid in full to the local government budget at the location of the land. The amount of land tax is determined by multiplying land taxation by the rate of land tax. All land is taxed, and the landowner pays the tax and the land user in certain cases. Land tax benefits are of two types: A benefit related to the taxpayer’s identity (for example, pensioners who have been repressed). A benefit related to the intended use of the land or to the restrictions placed on the land use (for example, arable land and natural meadows, as well as the land where economic activity is restricted).
Heavy vehicles are taxed for trucks and road trains with a vehicle weight of 12 tonnes or more. The heavy vehicle tax period is a quarter. The truck and the road train (heavy vehicle) are taxed according to the registration or gross mass, the number of axles and the type of spring suspension of the moving axle. Heavy vehicles of the Defence Forces, the Defence Union, police agencies and rescue agencies, and heavy vehicles of the leading rescue work of local self-government are exempt from tax on heavy vehicles, A non-profit association, fund or enterprise is used mainly for rescue operations.
A customs duty is a state duty established by European Union legal acts, which a person or business association must pay if it imports goods from third countries to the European Union (import duty) or exports the goods to third countries from the European Union (export customs duty). There are no import and export customs duties between the Member States or any similar taxes in the European Union, and uniform customs duties are imposed on third countries.
The gambling organizer pays the gambling tax. The gambling tax period is a calendar month. When organizing a tournament for luck, the period of taxation corresponds to the period of one tournament, which begins on the first day of the acceptance of the participation fees specified in the tournament rules. It ends on the day of the cancellation of the participation fee. In the case of a trade lottery, the tax period corresponds to the period of the trade lottery, which begins on the first day of the contributions specified in the game’s rules and ends on the last day of the winnings.
Excise duties in Estonia are set for alcohol, tobacco, fuel and electricity, and packaging. The Act mainly regulates excise taxation on Alcohol, Tobacco, Fuel and Electricity Excise (ATKEAS) and the Act on Excise on Packaging.
[vc_row][vc_column][vc_column_text]Bookkeeping is an integral part of doing business on behalf of an Estonian company, which is to keep records and obtain an overview of the company’s economic performance and financial state.
Accounting is an important part of the day-to-day activities of all persons obliged to keep accounting. Its purpose is to maintain a daily record and constantly obtain an objective picture of their economic performance and financial situation.
According to the Estonian accounting act, the person obliged to keep an accounting: as a legal entity under public law, a local self-government unit, every private or public legal entity registered in Estonia, an individual entrepreneur and a registered branch of a foreign business association.
Thus, all companies and branches of foreign companies operating in Estonia are subject to accounting. Accounting for each company must comply with government-set standards for the results to be comparable and understandable.
The accounting service of the enterprise includes processing and organization of information on the cash flow of the organizations in accordance with the Estonian and EU legislation. Management, accounting and tax registers are established at the customer’s request. Сomplete reporting is done to the Tax Department, the Business Register, the Statistics Department and other related institutions.
Non-VAT companies
It is essential to clarify that depending on turnover and policy, some companies register VAT while others do not. Hence, there are two different paths to follow depending on the company’s VAT status.
Companies with no monthly payments, purchases, invoices and VAT numbers can do accounts once a year before submitting an annual report. In that way, we deal with yearly based accounting.
In this regard, it is significant to consider that companies with no VAT must still collect all source documents and put them in order before submitting an annual report at the end of the year.
VAT companies
VAT or value-added tax is a broadly based consumption tax that not every company must register. VAT is required when the turnover threshold reaches 40,000 EUR. Therefore, there are two different paths to follow depending on the company’s VAT status.
A company with a VAT registered must submit tax returns every month.
It applies even if no transactions are done.
Basic requirements
Each company must prepare and submit an annual return to the Commercial Register for the previous year by June 30 of the current year.
All business transactions must be recorded in accounting programs.
All business transactions must be documented.
Accounting should provide a reliable, objective, and comparable view of the company’s financial situation, performance, and cash flows.
All accounting documents must be kept in the archive for at least 7 years.
Basic components
Balance sheet
First, you should prepare an opening balance sheet that lists your company’s assets, liabilities, and share capital before you start an economic activity.
Annual report
Another mandatory requirement for every company in Estonia is the submission of an annual report.
The annual report’s mandatory components include the management report on the company’s activities, the balance sheet, the company’s profit and loss statement, and the company’s capital statement.
You should complete all accounting procedures before drawing up the annual report.
Bookkeeping charts
Estonian companies can choose between two types of income statement schemes. Chart 1 of the income statement shows that business expenses are divided by the nature of expenses (for example, material costs, labour costs, depreciation deductions). This way is often used by smaller companies that do not need to assort costs by function.
In Chart 2 of the income statement, operating expenses are assorted by function (e.g. cost of goods sold, advertising costs, general administrative expenses). Chart 2 is usually more difficult to implement because all business expenses require a decision about which business function they are associated with. Certain costs (for example, labour costs) must be apportioned pro-rata across the various functions. The profit statement based on Chart 2 gives a better overview of the costs of various functions of the company, while the distribution of costs by function is subjective.
Financial year report
The financial year of the company is 12 months. In most cases, the fiscal year is a calendar year (from January 1 to December 31). Still, a company charter or other document that regulates its activities may also set a different fiscal year according to the accounting entity’s operating cycle. In exceptional cases, the financial year may be shorter or longer than 12 months but not longer than 18 months.
Company management report
The management report provides an overview of the company’s operations and the circumstances that have played a decisive role in assessing the financial situation and business activities, significant events in the financial year, and the expected development directions in the next financial year.
Suppose at the end of the financial year the company’s capital does not comply with the requirements of the Commercial Code (that is, it is negative). In that case, the management report should describe the actions taken to ensure the stability of the enterprise in the future if such has not yet been taken.
Audit
An audit or review of the annual financial statement aims to increase the reliability of your company’s financial information in the eyes of investors, shareholders, and the public. A legal audit allows you to protect your business in time — to detect, minimize or completely neutralize potential risks that financial, reputational, competitive and other losses may entail.
[vc_row][vc_column][vc_column_text]On 1 July, Estonian Tax and Customs Department launches an innovative Impulss system to fill and process import declarations.
The need for a new system arises from the rules that come into force on 1 July, according to which all assumptions from third countries should be declared.
“It is important for the department that our info systems support an increase in the volume of declared parcels. Considering the trends of foreign trade and the expectations of entrepreneurs regarding the fast movement and customs clearance of goods, we have developed Impulss”, informed the head of the Customs Development Department, Ursula Riyma.
The new information system works in three languages. “Impulss will allow companies to file large-scale customs declarations and reuse data previously submitted to customs information systems. An important change is also that it will be possible to file a customs declaration in Impulss before the arrival of the goods,” explained Riema. Impulss is primarily intended for enterprises and customs agencies importing goods from outside the European Union. Individuals will be able to use the system in the event of the declaration of parcels worth more than 1,000 euros, goods with a preferential rate of turnover tax or requiring a special permit.
[vc_row][vc_column][vc_column_text]Coop bank decides to mitigate cryptocurrency regulations and now allows its clients to buy and sell cryptocurrency for personal usage by using Coop bank account.
“Although banks are still very cautious about cryptocurrencies because of the risk of money laundering, we believe that there is no longer a reason to ban Coop Pank customers from buying and selling cryptocurrency for their use,” — said Heikko Meyer, a board member and risk-taker, Coop Bank manager.
He adds that recently the interest and trust of investors has arisen towards cryptocurrencies, especially bitcoins.
Still, changes do not apply to service providers of crypto wallets and other intermediaries who receive funds from third parties to obtain cryptocurrency for them.
“Service providers will continue to be subject to stricter rules that would preclude them from using the Coop bank platform, as such activities require a separate licence. Cryptocurrency carries a higher risk, and banks are required to develop appropriate measures and procedures and train personnel to reduce it,” — Miae explained.
Exploring Estonian business environment — starting a business in Estonia and its further development.
Estonia is a small country in Northern Europe that has built a digital society over a couple of decades. So far, the country with a population of less than 2 million is leading in the IT sector and is referred to as a 99% digitalised European country. Hence, unlimited tech opportunities have contributed to the fact that Estonia has drawn more and more attention as a prominent European entrepreneurial hub over the years. In our previous blog article, we covered the advantages of the Estonian business market and explored the reasons behind this, among which is a favourable tax system, fintech opportunities and talent pool. All of that constitutes a good motivation for setting up a business in Estonia.
Entrepreneurs worldwide intend to open a business in Estonia where legislation welcomes every business person, and various programs and companies are happy to offer their services on business formation development.
E-business and e-company are widely and fairly used terms when speaking about doing business in Estonia. Starting from the very first steps made online and continuing to fully remote management of a company, we may say that a business established in Estonia is an e-business.
Innovative programme e-Residency allows every willing foreigner to set up a company in Estonia remotely by submitting an application online. In short, e-Residency enables non-citizens to enter government portals online and is a great alternative way for company formation in Estonia. It also simplifies the further process of company management, making it remote.
Besides e-Residency, there are three more ways for setting up business in Estonia. Among which are company establishment by power of attorney and by a visit to the country. It is advisable to request assistance when starting a company by proxy or by visit, as the process involves lots of legal nuances, professional assistance won’t hurt. When cooperating with the authorised service provider, both ways guarantee the successful result — an active company in Estonia.
Estonian business market offers a business for sale, and this is the last option for obtaining a company in Estonia. Buying an existing company is still a process as the rest ways of company formation. It takes time and effort, so it is worth considering consult professionals.
Once all the initiation procedures are undergone, and you have your registered company, there are still many aspects to work on. Having a business means its constant development and apart from ‘artistic’ parts such as gaining and maintaining reputation, PR, establishing connections, branding and looking for talents — business involves endless legal aspects.
Legal support for a business is the key to the effective functioning of a company, especially if it’s the case with foreigners starting a company that may be not so well familiarised with the Estonian laws and requirements. In that way, it is a traditional method to seek professionals who can help you with legal advice, documentation, legal opinion, audit, etc.
If you decide to base your business here in Estonia, you will find the support you are looking for. Various service providers, IT companies and their technologies, innovative programmes will lead your business to a sufficient level — but you should take the first effort. Please don’t wait and join thousands of entrepreneurs that are basing their businesses in small North European country. LKS Consult OÜ will be glad to help.[/vc_column_text][/vc_column][/vc_row]
If you live in Estonia and earn money from virtual currency, here are some things you should know.
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.
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.
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 LKS Consult OÜ.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][us_btn label=”SEND A REQUEST” link=”url:https%3A%2F%2Fwww.estonia-company.ee%2Fcontacts%2F|||” align=”center” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][/vc_column][/vc_row]
Income tax is divided into income tax on natural persons and income tax on enterprises (income tax on a legal person is also paid for permanent employment of non-residents and all employers providing unique benefits). In addition to paying the income tax on the enterprise, you are also obliged to withhold the employee’s payments and pay the income tax to the Tax and Customs Department as an employer.
Value Added Tax – VAT, levied on goods and services sold in business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. The final consumer pays Value-added tax.
or RIK (Estonian) is a government portal ruled by the Ministry of Justice. The main objective of RIK is to provide innovative services for public administration and law enforcement.
The income tax is paid by resident natural persons on their entire income, regardless of the place (state) where it was earned. Suppose a person wishes to have an income tax deducted from his or her salary or other income during a tax-free calendar year. In that case, he or she should present to the person making the payment, A free written statement to that effect. At the same time (during the same month), tax-free income for only one person paying (for example, the employer) can be counted.
Bookkeeping is an integral part of doing business on behalf of an Estonian company, which is to keep records and obtain an overview of the company’s economic performance and financial state.
On 1 July, Estonian Tax and Customs Department launches an innovative Impulss system to fill and process import declarations.
Coop bank decides to mitigate cryptocurrency regulations and now allows its clients to buy and sell cryptocurrency for personal usage by using Coop bank account.
Estonia is a small country in Northern Europe that has built a digital society over a couple of decades. So far, the country with a population of less than 2 million is leading in the IT sector and is referred to as a 99% digitalised European country. Hence, unlimited tech opportunities have contributed to the fact that Estonia has drawn more and more attention as a prominent European entrepreneurial hub over the years. In our previous blog article, we covered 