This comprehensive guide will walk you through filing crypto taxes in Estonia, covering everything from understanding how crypto is taxed to choosing the right accounting method and ensuring compliance with the Estonian Tax Authority (MTA).

How is Crypto Taxed in Estonia?

In Estonia, regular taxpayers like us are subject to crypto taxation, which is based on income derived from various cryptocurrency activities. Taxable transactions encompass activities such as trading, converting cryptocurrency into fiat or other cryptocurrencies, and using cryptocurrency for purchasing goods or services. Income from cryptocurrency mining is categorized as business income. Additionally, any taxable income received in cryptocurrency, such as rent, interest, and business income, is liable to income tax.

According to a ruling by the Court of Justice of the European Union, exchanging virtual currency for traditional currency and vice versa is considered a service for consideration and is exempt from VAT. However, transactions involving non-traditional currencies are treated as financial transactions if parties accept them as alternatives to legal tender.

Income can be generated through various means, including price changes during sales or exchanges, making payments with crypto, engaging in mining, and renting computer data. Activities that are not subject to taxation include donating, purchasing cryptocurrency with fiat, transferring between wallets, and giving cryptocurrency as a gift.

Profits from cryptocurrency transfers, including exchanges, are liable to income tax and are taxed at a fixed rate of 20%. The taxable gain is determined by the difference between the selling and purchase prices or the value of the received property and the cryptocurrency's purchase price. Unfortunately, losses incurred from cryptocurrency exchanges cannot be claimed as deductions for tax purposes.

Cryptocurrency is classified as property, and any taxable income generated must be disclosed in the income tax return. Each transfer transaction, including exchanges, is treated as a distinct taxable entity. When dealing with cryptocurrency exchanges involving traditional currency, it is necessary to convert the amounts into euros using the market rate prevailing on the date of receipt.

Can The MTA Track Crypto?

Being an EU member state, Estonia has access to KYC details and transaction records from all crypto-related services, thanks to regulations like AMLD-6 and DAC-8. The MTA can track crypto transactions easily and identify discrepancies in tax reports. It's crucial to report all transactions to the MTA to avoid potential issues with the tax authority.

Knowing which Crypto Transactions are Taxed in Estonia

In Estonia, the taxman comes knocking for various crypto activities, including selling crypto for fiat, swapping one crypto for another, using crypto for purchases, making and staking crypto, and earning crypto as income. On the flip side, certain moves, like donating crypto, swapping fiat for crypto, transferring crypto between wallets, and giving crypto as a gift, are tax-free.

Choosing the Right Accounting Method

When dealing with multiple crypto assets at different prices, choosing the right accounting method becomes essential. In Estonia, the Tax Authority allows two methods: FIFO (First-In-First-Out) and Weighted Average Accounting. FIFO uses the acquisition price of the first asset bought as the cost basis for the latest disposal, while the Weighted Average Method considers the average acquisition price of all assets at the time of disposal.

When To Report Crypto Taxes in Estonia

Residents in Estonia have until April 30th (or May 2 for the year 2024) of the following year to submit their tax returns. Electronic filing opens on February 15th, offering a digital route for tax reporting. Self-employed individuals must also make advance tax payments on specific deadlines.

How to File Crypto Taxes in Estonia

When it comes to filing your taxes in Estonia, you've got three hassle-free options:

• File your taxes online through the user-friendly e-MTA portal. Just make sure you have a government-authorized ID card, a Mobile-ID, a smart ID, or an e-ID from an EU country.

• Send your tax info via post to the Tax and Customs Board’s Service Bureau.

• Keep it simple with good old-fashioned paper forms.

And to guide you through the e-MTA portal, check out the video tutorial once you've logged in.

When you're reporting profits from your cryptocurrency transactions on your tax return, refer to either table 6.3 or 8.3, labeled "Transfer of other property."

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If the platform you used for crypto transactions is based in Estonia, record the transactions in Table 6.3. For platforms registered elsewhere, note the transactions in Table 8.3. In the table, specify "cryptocurrency" as the type of property.

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Include the purchase cost and any associated expenses for the transfer, along with the sales or market price. The purchase cost is the value of the bought cryptocurrency in euros at the time of purchase, while the sales or market price is the cryptocurrency value in euros at the time of sale or exchange.

What Records will the MTA Want?

To ensure a smooth tax filing experience, maintain detailed records of all transactions, acquisition prices, disposals, fair market values of tokens, and details of the type of asset bought, sold, exchanged, or traded.

Why Stress when you can file your crypto tax using Kryptos?

Now that you understand how crypto transactions are taxed and the necessary forms for your tax report, let's break down the user-friendly steps to streamline this process using Kryptos:

1. Head over to Kryptos and sign up using your email or Google/Apple Account.
2. Select your country, currency, time zone, and accounting method.
3. Import all your transactions from wallets and crypto exchanges.
4. Choose your preferred report and click on the "generate report" option on the left side of your screen, allowing Kryptos to handle all the accounting for you.
5. Once your tax report is ready, easily download it in PDF format.

For any questions about integrations or generating your tax reports, check out our helpful video guide here.

FAQs

1. How does Estonia tax cryptocurrency transactions?

In Estonia, cryptocurrency transactions are subject to taxation based on various activities such as trading, converting crypto to fiat or other cryptocurrencies, and using crypto for purchases. Income from mining is considered business income, and taxable income received in cryptocurrency, like rent or interest, is subject to income tax.

2. Which crypto transactions are taxable in Estonia?

Taxable crypto activities in Estonia include selling crypto for fiat, swapping one crypto for another, using crypto for purchases, mining, and earning crypto as income. Conversely, donating crypto, transferring between wallets, and giving crypto as a gift are tax-exempt.

3. What are the accepted accounting methods for crypto taxation in Estonia?

Estonia allows two accounting methods for crypto taxation: FIFO (First-In-First-Out) and Weighted Average Accounting. FIFO bases the cost on the first asset bought, while Weighted Average Method considers the average acquisition price of all assets at disposal.

4. When is the deadline for reporting crypto taxes in Estonia?

Residents of Estonia must report their crypto taxes by April 30th (May 2nd for the year 2024) of the following year. Electronic filing opens on February 15th, offering a convenient digital route for tax reporting, while self-employed individuals have specific deadlines for advance tax payments.

5. What records are required for filing crypto taxes in Estonia?

To ensure compliance, maintain detailed records of all crypto transactions, including acquisition prices, disposals, fair market values, and type of assets involved. These records are crucial for a smooth tax filing experience and to satisfy the requirements of the Estonian Tax Authority.

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All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!