Estonia is one of the few countries which defined categorisation of cryptocurrency and the income generated from it, until and unless a dedicated tax regime is rolled out. While the country is still sceptical and is warning people about the risks of crypto, it has also clarified how crypto is taxed in Estonia for the citizens and has listed the income to be disclosed. The government has not accepted crypto as the legal tender, but it is perceived as a valuable asset in a digital form.
In Estonia, over 32 thousand people, that is 2.4% of its population owns crypto and the government is open to innovative ways to regulate and utilise the potential that cryptocurrency holds.
Do you have to pay crypto tax in Estonia?
Yes, you have to pay crypto tac in Estonia. Any income received from crypto, either remuneration or through trading, is taxed in Estonia.
When do you have to pay tax on crypto in Estonia?
Whenever any income is generated in crypto or via crypto, it is taxable in Estonia.
What crypto transactions are taxable in Estonia?
- Sale of crypto
- Exchange of crypto
- Spending in crypto
- Income received in crypto
What are the Crypto Tax Rates in Estonia?
Estonia has a flat tax rate of 20%, which is levied on all income levels and all items that generate income. When income is generated from crypto, it is also taxed as general income and thus, attracts a rate of 20%.
Estonia Income Tax Brackets (2023)
20% flat rate for all income levels.
Estonia Capital Gain Tax Rates (2023)
Capital gains in Estonia are also treated as ordinary income and taxed accordingly.
How is Tax Calculated on Cryptocurrency in Estonia?
While selling or exchanging crypto, the gains are taxed. If you are spending in crypto, then the difference between the price at which you acquired the crypto and the price of the item you bought with crypto is taxed.
In order to calculate the value of crypto gains, there are two methods used globally: FIFO (First In First Out) and ACB (Average Costs Based).
According to FIFO Method, you sell your oldest acquired coin first and cost is calculated according to the respective prices at which the coin was bought. Whereas, in ACB, time of buying doesnt matter and average cost is taken into account.
Let’s take an example,
Say you bought 2 BTC for EUR 20,000 in 2020 and 4 BTC for EUR 60,000 in 2021. Then you sold 4 BTC in 2022 for EUR 100,000:
- FIFO METHOD
You sell 2 BTC from 2020 and 2 BTC from 2021. So cost price is:
= 20,000 + (2/4)*60,000
= EUR 50,000
Profit = 100,000 – 50,000
= 50,000
Here, taxes are levied on EUR 50,000 .
- ACB METHOD:
All coins are of the same denomination. Therefore, cost price for one coin:
= (20,000 + 60,000)/6
= EUR 13,333
So, cost price of 4 coins:
= EUR 53,333
Profit = 100,000 – 53,333
= 46,666
Here, taxes are levied on EUR 46,666.
Is there any Crypto Tax Free in Estonia?
Transactions that do not generate any income, like buying crypto or transferring between wallets are tax free in Estonia.
Crypto Tax in Estonia – FAQs
Do you have to pay tax when you buy crypto in Estonia?
No, you do not have to pay tax when you buy crypto in Estonia.
Do you have to pay tax when you sell crypto in Estonia?
Yes, you have to pay tax when you sell crypto in Estonia
Do you have to pay tax when transferring crypto in Estonia?
No, you do not have to pay tax when transferring crypto in Estonia
Do you have to pay tax when spending crypto in Estonia?
Yes, you have to pay tax when spending crypto in Estonia
Is swapping crypto taxable?
Yes, swapping crypto is taxable in Estonia.
How much tax on crypto gains in Estonia?
20%.
How do I avoid capital gains tax on crypto in Estonia?
There is a tax exemption under EUR 6000 if the income of the person qualifies.
Market Research Intern, Octaloop
Maitreyee takes a keen interest in financial technologies and their potential to transform lives at the grassroots. Put together with her penchant for Economic Research, she brings tonnes of academic and actionable insight into our products. Maitreyee is contributing at Binamite as a Market Research Intern, and when she's not doing that, you can find her exploring the city or buried in a book.