Investing in Cryptocurrency: Personal vs via Company in Estonia

Estonia remains a prominent destination for cryptocurrency investments, thanks to its progressive tax system and business-friendly environment. However, before investing in cryptocurrency, you need to decide whether to do so as an individual or as a company (legal entity). This is the question we are going to explore in this blog post and this is an area that we can support you with: understanding the tax implications is essential to optimize your strategy and maximize returns.

Investing in Cryptocurrency as an Individual

Investing in cryptocurrency may be a high risk but there can also be high rewards. The good news is that investing personally is more straightforward than you might think. You can join a Bitcoin exchange and start investing quite easily, providing you get through the checks.   

Depending on your investment style – are you a holder or a trader and your country of residence, the tax burden can become significantly higher compared to investing in crypto with an Estonian company.

For example, if you are an Estonian resident and selling your personally held cryptocurrency with the profit you’d need to pay income tax on it, whilst investing through an Estonian limited liability company you can reinvest the profits without taxes.

Plus, if you sell with a loss, you are personally liable, aka you pay for the loss personally not the legal body. As an individual the loss is not allowed to be taken into account, you will not have to declare it either.

In order to declare the profits, you need to convert cryptocurrency into regular fiat currency based on the current market exchange rate, the profit needs to be calculated and tax paid.

Although some countries do not make cryptocurrency taxable on a personal level, Estonia does with income tax, so you will need to declare income from trading as well as the income from the conversion of cryptocurrency into regular currency. More information on this can be found here.

Already have crypto assets as an individual and wish to find out how to transfer crypto assets to your Estonian company? Take a look at our previous blog where we reveal how you can do this: How to transfer crypto assets to your Estonian company – Silva Hunt

Investing in Cryptocurrency Through a Company

For those investing through a company, Estonia’s corporate tax system provides advantages by taxing profits only upon distribution. Retained and reinvested earnings are tax-free until dividends are paid out, which are subject to a corporate profit distribution tax of 22%

“A resident company pays income tax on the distribution of profits, i.e. on the payment of a dividend at the rate of 22/78. Benefits granted by the employer (fringe benefits) to employees are subject to income tax at the rate of 22/78 and social tax at the rate of 33%. Expenses or payments made by a resident company, which are not related to the company’s business, are subject to income tax at the rate of 22/78” – source, Emta.ee

Therefore, on the taxing side holding your crypto assets in the company is no different from holding investments in stocks or bonds. There is no special tax for crypto assets in Estonia.

Benefits of Corporate Cryptocurrency Investment

+ Tax Deferral: Earnings remain untaxed until distributed as dividends.

+ Liability Protection: A company structure separates personal assets from investment risks.

+ Simplified Management: Consolidating investments within a corporate entity streamlines financial reporting and oversight.

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Choosing the Right Approach

When deciding between personal and corporate cryptocurrency investments in Estonia, consider the following:

• Taxation: Corporate investments benefit from deferred taxes on reinvested profits, while personal investments face immediate taxation on gains.
• Long-term Goals: A corporate structure may better align with long-term investment strategies.
• Compliance Requirements: Operating a company requires additional administrative efforts.

So in conculsion…

Investing in cryptocurrency in Estonia offers distinct advantages, whether you choose a personal or corporate approach. The decision depends on your financial goals, investment size, and willingness to manage corporate compliance. Consult our tax professional to tailor your strategy and ensure compliance with Estonia’s tax laws.