Currently, Estonian banks do not open accounts for cryptocurrency companies. In any case, the Estonian Law allows local companies to open their bank accounts abroad. We have already successfully opened accounts from cryptocurrency companies with other EU banks and EMIs/PSPs. We can’t guarantee a positive result, as it depends on all the details and how the client cooperates during the KYC process.

Estonia does not have a classic corporate income tax. Instead, only distributed profits get taxed. Distributed profits are generally subject to the 20% corporate income tax (CIT) at 20/80 of the net amount of profit distribution. For example, a company that has profits of 100 EUR available for distribution can distribute dividends of EUR 80, on which it must pay CIT of EUR 20. This ultimately means that if a company’s crypto assets increase in value, but its profit is not distributed, the company does not have to pay corporate income tax on the generated profit. In other words, under the Estonian taxation scheme, a company can benefit from being able to reinvest its profit and will not have to purchase or exchange for local currency to pay taxes. For micro businesses and start-ups whose funds are scarcer than readily available, this opportunity provides them with a solid strategy to help sustain their activities in the early days.

For accounting purposes, each transaction must have the value in EUR and VAT – rules apply as per usual/normal operations. Payments for goods or services in the form of virtual currency does not free you from following VAT rules. If VAT is applied in fiat currency payments, then it should be applied in virtual currency payments as well. Monthly VAT returns must be submitted in EUR and VAT will be paid/returned in EUR. The Estonian standard VAT rate is 20%.

Malta is another jurisdiction of interest from crypto-businesses. Although, at this particular point in time, Estonia seems a much better alternative. In fact, in Malta: a license is issued in no less than 4 months (and up to 6 or more months); the applicant must make a relevant deposit (EUR 720,000); the company registration process is more time-consuming and expensive than in Estonia; for the success of the application, a ‘Virtual Financial Asset Agent’ (VFA Agent) must be appointed; the Estonian business environment is much more friendly, supportive and easy-going than the Maltese’s.

In case you think your company’s planned business is not within the scope of the activities covered by Virtual Currency Service Operator license, we recommend that you take a preliminary legal analysis to find out which activity license or registration your business model requires. We can arrange a preliminary legal analysis at a reasonable cost to determine whether the operating license suffice for your business or not. To do so, we need your simple business explanation or white paper. Usually, the preliminary analysis can be provided in a few days.