The birthplace of Skype has always been at the forefront of tech, and bitcoin is no different. Rated 4th in Europe for economic freedom and 12th in the world for ease of doing business, Estonia has carved its name as one of the world’s most bitcoin-friendly countries. Here’s how the country is innovating and adapting itself to bitcoin technology and the world of cryptocurrency.
Classification of bitcoin in Estonia
In Estonia, bitcoin is considered an alternative currency and not a security. This summary of Estonian laws on bitcoin taxation states that bitcoin are classified in the same way as the ECB. This means that you must be registered as a provider of a business service in order to trade bitcoin or conduct transactions.
Bitcoin taxation in Estonia
Profits made from trading bitcoin in Estonia are exempt from paying VAT, but must pay capital gains tax of around 25%. The VAT tax is not applicable to bitcoin transactions after a 2015 court ruling classified bitcoin as a currency rather than property.
Note that there is some unclarity in regards to Estonia’s taxation of bitcoin trading. Some traders claim to have paid an additional 33% social tax, while others report having only paid a 20% income tax on their bitcoin trades.
If you’re looking to trade bitcoin in Estonia with a business, you should do your own investigation into the charges as you would likely be taxed lower rates than stated in this article. For more information you can check out the Estonian Tax and Customs Board.
Bitcoin businesses & e-residency in Estonia
Estonia’s notoriously free economy makes it easy for foreigners to establish a legal and banking identity in the country (and therefore, the whole of Europe). Its e-residency scheme is a crypto traders gateway into the European market, making Estonia a haven for bitcoin.
E-residency isn’t the same as a tax residency, and you won’t be able to use it to register a crypto exchange. However, it is the easiest way to open a bitcoin business and enter the European market. You can read about the e-residency process in detail here – note that it can be quite easy and affordable for most people, but others might have to acquire certain licenses. Reportedly, it costs around 8,000 euro to open a bitcoin business in Estonia.
Estcoin, an Estonian national cryptocurrency
Despite criticism from the European Central Bank, Estonia is pushing boundaries and still in deliberation to launch Estcoin, a national cryptocurrency. Estonia’s resistance to criticism from the ECB demonstrates the country’s openness and desire to promote and integrate bitcoin. The government is even considering a bitcoin-based sovereign wealth fund.
In the banking sector, the same support for bitcoin exists. Estonia’s LHV Bank issues blockchain-based wallets for Euro tokens, trains its employees in cryptocurrency, and has partnered with Coinbase and Coinfloor exchange in the UK. The bank is open about its interest in blockchain tech and bitcoin values.