Cryptocurrency company taxation in Estonia

All you need to know about cryptocurrency company taxation in Estonia.

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Cryptocurrency turnover tax

Cryptocurrency transactions are not subject to turnover tax. On October 22, 2015, the European Court determined (case C-264/14) that Article 135 (1), par. 1, Turnover Tax of the Directive should be interpreted in such a way that the exchange of a virtual currency for conventional money and vice versa and (fiat) currency exchange services are tax-free.

CRYPTOCURRENCY INCOME TAXATION

In the case of virtual currency, the income may be taxable in the following circumstances:

• virtual currency price changes when buying and selling/exchanging virtual currency
• virtual currency mining
• receipt of payment in virtual currency for performed works

Income in virtual currency is taxable similarly to income in conventional currency. For the purpose of taxation, the virtual currency purchase price or the income shall be converted to euros based on the current exchange rate (market price) on the transaction date or the income receipt date.

Taxation of cryptocurrency transactions

• Virtual currency is considered as property within the meaning of Art. 15, par. 1 of the Income Tax Law (ITL).
• Only profit (Art. 37) from the sale or exchange of alienated property items (Art. 15. par. 1 of the ITL) is subject to income tax — that is, the income tax is imposed on the income received from the alienation of virtual currency, including exchange.
• Profit or loss from the sale of a property is the difference between the purchase price of the property being sold and its sale price. Profit or loss from the exchange of property is the difference between the purchase price of the property being exchanged and the market price of the property acquired by exchange (Art. 37, par. 1).

1) When buying/selling cryptocurrency, taxable profit shall be calculated using the following formula:

sale price — purchase price — costs directly related to the sale = profit subject to income tax in case of profit distribution.

2) When exchanging cryptocurrency, taxable profit shall be calculated using the following formula:

the market price of the property acquired by exchange — purchase price of the asset being exchanged — costs directly related to the exchange = profit subject to income tax in case of profit distribution.

Mining taxation

Mining as such (activity) is not subject to taxation, and the registration of a person liable to taxation is not required. Suppose an individual carries out virtual currency mining or data processing independently, and the received income is tax-free. In that case, the individual shall declare one’s income as a business income and pay taxes based on the tax statement.

An individual carrying out virtual currency mining shall be registered as an individual entrepreneur or a limited liability company (OÜ). The registered individual entrepreneur or OÜ can deduct the expenses incurred to obtain business income (for example, the cost of farms, the cost of renting premises for mining, the electricity costs, etc.) from the business income and declare such expenses.