Estonia Crypto Tax Guide 2024
Author: Roxy, Co-founder & CEO at Finloo
Estonia is one of the hotspots for crypto companies in Europe and the popularity of cryptocurrency fits with Estonia’s image as a tech success story. The growth in this sector is remarkable and investor´s interest in any blockchain-related solutions is high.
Although Estonia has recently increased the fees for crypto licenses, it has the potential to remain a favourable jurisdiction for development-oriented crypto companies from low corporate taxes and over 60 international double taxation elimination agreements that can allow your crypto business to protect your income from taxation in two different countries.
Overview
- What is a digital payment token in Estonia?
- Web3 for Businesses and Individuals
- What are the crypto tax rates in Estonia?
- How is crypto taxed in Estonia?
- When is the deadline for crypto taxes in Estonia?
- Should Web3 Businesses register for VAT in Estonia?
- What are the types of crypto licensing in Estonia?
What is a digital payment token in Estonia?
Under Estonian law “virtual currency” means a value represented in digital form, which is digitally transferable, preservable or tradable and which natural persons or legal persons accept as a payment instrument, but that is not the legal tender of any country or funds for the purposes of Article 4(25) of Directive (EU) 2015/2366 of the European Parliament and of the Council on payment services in the internal market or a payment transaction for the purposes of points (k) and (l) of Article 3 of the same Directive.
The term “cryptocurrency” refers to the exchange currency used, for example, for the sale / purchase of goods or services, as well as for investments aimed at maintaining or increasing the value of cryptocurrency. Cryptocurrency includes, for example, Bitcoin, Ether, Litecoin, etc.
Web3 for Businesses and Individuals.
Natural persons must declare the income from trading in cryptocurrency, as well as the income from the conversion of cryptocurrency into regular (fiat) currency, the exchange of cryptocurrency into another cryptocurrency, or payment with cryptocurrency for goods or services. Income from cryptocurrency mining is considered the business income of a natural person.
For individuals engaged in the development of cryptocurrency, income from this activity is considered entrepreneurial income. Such individuals must register with the commercial register and act as sole proprietors (FIE) or through a business entity. Importantly, expenses related to the generation of income from cryptocurrency development cannot be deducted by individual entrepreneurs.
If a private individual mines cryptocurrency, the income must be declared as business income. A person permanently engaged in virtual currency extraction must be registered in the commercial register and operate as a sole proprietor or a company. It is possible to invest in cryptocurrencies under the company, in which case the company’s tax rules must be followed.
What are the crypto tax rates in Estonia?
In Estonia, cryptocurrency income is considered gains from the transfer of property and is subject to a 20% income tax rate. All profitable transactions must be declared regardless of the amount of profit incurred.
Estonia’s tax system is controlled and administered by the Estonian Tax and Customs Board (ETCB), which currently does not impose any cryptocurrency-specific taxes, which means that Estonian crypto companies are subject to existing regulations.
Crypto companies in Estonia are obliged to pay taxes for such activities as:
- Converting cryptocurrencies into Fiat Money and Vice Versa
- Cryptocurrency Exchange for Other Cryptocurrencies
- Using cryptocurrencies to pay for goods or services
Depending on the legal structure and activities of a crypto company, the following taxes might be levied:
- Corporate Income Tax (CIT) – 0%-20%
- Social Tax (ST) – 33%
- Value Added Tax (VAT) – 20%
- Withholding Tax (WHT) – 7%-20%
How is crypto taxed in Estonia?
Income received in cryptocurrency (gains from the transfer of property, income from employment, business income) is taxed on a similar basis as income received in traditional currency.
As regards the taxation of virtual income, the purchase or sales price or received income has to be converted into euros at the exchange rate of cryptocurrency (market price) applying on the date of receipt of the income or costs.
In 2024, there have been changes in Estonian tax legislation, including those related to the taxation of cryptocurrency. It is important to note that converting income that is already taxable (e.g., salary received in cryptocurrency) into regular currency or using it to purchase goods and services does not entail additional tax liabilities. That is, if tax has already been paid on income received in cryptocurrency, no additional taxation applies when it is used.
In 2024, platforms and payment intermediaries are obliged to provide information on user income to the Estonian Tax and Customs Board. This applies to trading platforms, rented real estate, services provided, sale of goods and rental of vehicles
When is the deadline for crypto taxes in Estonia?
The tax period for any Estonian company is one month, and you have to file your tax returns (expenses, revenues, payments, and tax liability circumstances) by the 10th of each calendar month.
Each April, you will have to declare your income from transactions that occurred in the previous calendar year.
- 15 February each year – Online tax portal opens, and you can start declaring your taxes.
- 30 April each year – Last day to submit your taxes
Should Web3 Businesses register for VAT in Estonia?
According to the ruling of the European Court of Justice, cryptocurrencies are exempt from VAT.
What are the types of crypto licensing in Estonia?
In Estonia, the regulation of cryptocurrency businesses is well-defined and structured. As of 2024, there are two distinct types of licenses available for Virtual Asset Service Providers (VASPs):
Cryptocurrency Exchange Services License
This license allows companies to offer services that involve exchanging virtual currencies for fiat currencies, or exchanging one virtual currency for another. Key points include:
Scope of Services
- Exchange between virtual currencies and fiat currencies.
- Exchange between different virtual currencies.
Requirements
- A company must be registered in Estonia.
- A minimum share capital of 100,000 EUR.
- At least one board member must be a resident of Estonia.
- Implementation of robust AML (Anti-Money Laundering) and KYC (Know Your Customer) procedures.
- Appointment of an AML officer.
Crypto Wallet Custodial Services License
With this crypto licensed companies in Estonia can provide services related to keeping, storing and transferring crypto currencies. This involves generating and storing cryptographic keys used for customers to manage and store their virtual currencies. Key points include:
Scope of Services
- Custody and management of virtual currency wallets.
- Safekeeping of customers’ cryptographic keys.
Requirements
- A company must be registered in Estonia.
- A minimum share capital of 250,000 EUR.
- At least one board member must be a resident of Estonia.
- Implementation of robust AML and KYC procedures.
- Appointment of an AML officer.
Estonia has achieved a lot on digital journey, and they are ranking first in developing digital public services and among the top European top 10 countries overall. Estonia is rightfully known as the most advanced digital society in the world.
The tax treatment of crypto assets in Estonia continues to evolve as the market matures, reach out to Finloo at [email protected] to find out more!
Contact: [email protected]
Check out the full Global Crypto Tax Report 2024