[vc_row][vc_column][vc_column_text el_class=”padding”] 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.
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.[/vc_column_text][/vc_column][/vc_row]
[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]
[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.
International companies should be aware of taxation and laws in the countries of their activity.
Overview
Corporate tax – 0% on retained profits
Dividend tax – 25%
VAT – 20%, if the company is VAT number holder – VAT is required when the turnover threshold reaches 40,000 EUR
Distributed profits are:
corporate profits distributed in the tax period
expenses not associated with business
transferred assets
donations
According to 2021, the tax period is a month.
If the company has employees:
Minimum salary in 2021 – 584 EUR per month brutto
The tax-free minimum in Estonia is 500 EUR
Income tax for private person – 20%
Social tax – 33%, with a minimum obligation in 2021 – 192.72 EUR
Social tax revenues are used to fund public health care and pension insurance. Social tax is paid by the employer for the employee. The social tax rate is 33% of the employee’s gross income.
The tax period is a calendar month: by the 10th day of the following month, the tax is declared in a tax return (TSD) and paid to the Tax and Customs Board. The declaration can be submitted electronically at the e-Tax and Customs Board (e-MTA) or by contacting the regional tax office of the Tax and Customs Board.
From 2012, a rate of a funded pension payment is 2% of the gross salary
Unemployment insurance – 1.6% paid by the employee and 0.8% paid by the employer – 2.4% in total
Unemployment tax aims to insure employees against unemployment, collective termination of employment contracts or insolvency of the employer.
Unemployment insurance must be paid on the salary and other remuneration of the employee and the compensation paid to the natural person under the contract. The obligation to pay is shared between the insured employee – employee (employee unemployment insurance payment) and the employer (employer’s unemployment insurance payment).
e-Tax is a government online tax filling system where are made almost every tax declaration in Estonia. It is available for residents or e-Resident card owners.
By signing in to the system, an individual can:
Make declarations
Request a company’s declarations for income, social, unemployment taxes and pension fund
Request VAT-returns
Register personal income tax declarations
Non-residents should request professional help and choose a tax representative. The tax representative of a non-resident is a person who has obtained an activity license to represent the non-resident for the performance of obligations arising in Estonia.
LKS Consult OÜ will be happy to provide accounting services for your Estonian company and advise you on issues related to taxation, tax agreements, and potential risks that may arise during your company’s operation.
Some potential issues that may be addressed:
Taxation of an Estonian company
Tax agreements between Estonia and other countries
Analysis of the identification of potential operational risks
Taxation of dividends and other income
Cross-border VAT rules
Taxes arising in different countries
Advice is provided to give an overview of taxation in case of international transactions arising in your Estonian company’s activity. The exact scope and cost of advice depend on your query.[/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]
Сompany registration involves various legal aspects regulated by the Estonian legislation. Among which is VAT registration being essential in some cases. In this article, we consider when you should register VAT for your company and how to do so.
The process
First and foremost, сompanies 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. If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
Please note that since exceeding the threshold of 40,000 EUR, you have three working days to register your company as taxable. Hence, the Estonian Tax and Customs Board will treat your company as taxable from the moment of reaching the threshold.
It is also possible to apply for VAT before the threshold value is reached. In that case, if you feel that your company is likely to reach the threshold of 40,000 EUR, it is wise to start the process beforehand.
When VAT is registered, as a VAT payer, you must pay it to the Estonian Tax and Customs Board and submit monthly VAT returns. It refers to the months during which there was nothing to declare.
As we already mentioned, you can voluntarily register your company for VAT if you don’t exceed 40,000 EUR of annual sales. You need to prove to the Estonian Tax and Customs Board that you intend to start and run your business in Estonia. Usually, the authority asks for your business plan.
Authorities may also refuse VAT registration if your company has no visible activity located in Estonia. The consideration of your application usually takes up to 5 days. Once approved, you will receive your company’s VAT number. The Estonian VAT number starts with a prefix EE which is followed by nine digits: EE123456789.
Numbers
The general VAT rate is 20% in case your OÜ provides services to clients. It also could be reduced in some particular cases. For example, if your company deals with providing accommodation services, book sales of books, or medical services/products. If you serve customers in third countries or another EU country, 0% VAT is applied.
Some legal nuances also depend on the type of service that is performed, which allocate where a specific service should be subject to VAT. You can find more detailed information on the Estonian Tax and Customs Board homepage.
All in all, the taxable period for VAT is one month, and you must declare and pay VAT to the Tax Authorities by the 20th day of the month following.
Turnover tax does not apply to cryptocurrency transactions. Article 135 (1), par. 2 of the Constitution is enforceable. The European Court held (case C-264/14) that it is enforceable. In accordance with Article 1 of the Directive, Turnover Tax is interpreted to apply to the exchange of a virtual currency for a conventional currency and vice versa, as well as to services related to currency exchanges (fiat currencies).
INCOME TAXATION ON CRYPTOCURRENCIES
The following situations may trigger taxation of virtual currency income:
Purchasing and selling virtual currencies/exchanging virtual currencies can affect the price of the currencies
The mining of virtual currencies
Payment for performed work in virtual currency
In the same way that conventional currency income is taxable, virtual currency income is taxable as well. Taxation will be based on the exchange rate (market price) on the date of the transaction or income receipt when the virtual currency purchase price or income is converted to euros.
Transactions involving cryptocurrencies are taxed
In accordance with Article 15, par. 2, virtual currencies are considered property. The Income Tax Law (ITL) is governed by section 1.
There is an income tax only on income received from alienating virtual currency, including exchanges, according to Article 37 of the ITL; in other words, only profits from the sale or exchange of alienated property items are taxable.
The difference between the purchase price and the sale price of a property is the profit or loss from the sale. A property exchange generates profit or loss based on the difference between the purchase price of the property being exchanged and the market price of the property acquired through the exchange (Art. 37, par. 1).
The following formula shall be used when calculating taxable profit when buying and selling cryptocurrency:
Profit subject to income tax if distributed is the difference between the sale price and the purchase price.
The following formula shall be used when exchanging cryptocurrency to determine taxable profit:
In the case of profit distribution, market price of the asset being exchanged minus purchase price of the asset being exchanged equals profit subject to income tax.
Mining taxation
Taxes are not imposed on mining (activity) as such, and individuals liable for taxes do not need to register. The individual must declare one’s income as a business income and pay taxes based on their tax statement if the individual mines virtual currencies or processes data independently and receives tax-free income.
The person mining virtual currency must be registered as either a limited liability company (OÜ) or as an individual entrepreneur. Registered entrepreneurs or OÜs can deduct expenditures incurred to obtain business income from the business income by claiming such expenses (for example, farm costs, rental costs for mining facilities, electricity costs, etc.).
Taxation of Estonian companies is the most profitable in the European Union. The main advantage is 0% on the company’s retained earnings and the possibility of not having employees who need to be paid a salary every month – a member of the company’s management Board can work for dividends. The absence of a tax on retained earnings is especially beneficial for those entrepreneurs who invest all their profits in the development of an Estonian company. Examples of taxes applicable to individuals and businesses are listed below.
PAYROLL TAXES
Taxes that must be withheld by the employer when paying wages:
Old-age pension saving contributions (only for residents of Estonia) – 2% of gross salary, unemployment tax on employee’s salary (only applicable for residents of Estonia) – from 0.5% to 2.8% of gross salary and income tax 20% of gross salary.
Taxes that must be paid by the employer in connection with the payment of wages to the employee:
Mandatory unemployment insurance contribution (from 0.25% to 1.4% of gross salary) and social tax (33% of gross salary and occurs in the case of payroll and is subject to transfer by the enterprise to the Fund). These taxes are payable by the employer in addition to the payment of wages (i.e. the taxes that the employer withholds from the employee when paying wages are included in the “tax base” from which the social tax and the employer’s mandatory unemployment insurance contribution are paid).
Payroll taxes for non-residents
If a non-resident is a member of the Board of an Estonian company, only 20% of the income tax is paid on one’s salary.
Value added tax in Estonia-VAT
The standard VAT rate in Estonia is 20%, 9% (reduced rate) and 0% (exemption with the possibility of offset).
Income tax business/sales tax (profit tax)
Profit tax or corporate income tax is 0% (there is no concept of profit tax in Estonian legislation, but there is a concept of taxation in the distribution of profits, which applies only in the case of payment of dividends or wages)
Tax on dividends
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.
Accounting consultation
from 170 EUR
[/vc_column_text][us_btn label=”Order now” link=”url:https%3A%2F%2Fwww.estonia-company.ee%2Fcontacts%2F|title:Contacts||” align=”center” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”]The specialists of LKS Consult OÜ will be happy to assist you with accounting services for your Estonian company.[/vc_column_text][/vc_column][/vc_row]
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.
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.
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.
First and foremost, сompanies 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. If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
The following situations may trigger taxation of virtual currency income: