The virtual currencies sector is growing larger day by day as new business ideas are brought to life and governments around the world are starting to accept and regulate the industry.
However, running a company that deals with virtual assets can be complicated when you must keep accounting records and make reports to a local government.
Therefore, you should think about outsourcing your bookkeeping activities to a local company that has the knowledge and the experience to make sure that all your records are kept and reported correctly.
Overview of virtual currency accounting in Estonia
Any business that is using blockchain technology-based instruments or virtual assets in Estonia must properly record all transactions that have been and are taking place. Luckily, there have been standards for recording, reporting and various laws put into place, which have helped to organise this aspect within the sector.
Guidelines that have been developed by the Estonian Accounting Standards Board has divided virtual assets that use blockchain technology into 4 different groups to help with recording:
- Virtual currencies
- Asset-backed tokens
- Utility tokens
- Security tokens
Knowing which virtual assets you are dealing with is a very important step in determining on how and when taxation will apply.
Taxation of virtual currencies in Estonia
Per the European Court of Justice, the exchange of virtual currency for traditional currency or vice versa, and the exchange service itself shall be exempt from value-added tax (VAT), which is already a great benefit when operating with such a company in Estonia.
When it comes to taxing income on virtual currencies, the story is a bit different, as they are taxed similarly to traditional currencies. In Estonia, virtual currencies are treated as property per the Estonian Income Tax Act, where taxation only applies on gains.
Therefore, taxation only applies on gains acquired from the sale or exchange of virtual assets, mining or as a payment for work performed is taxed the same way as traditional currencies.
To get an extensive overview of how different virtual currency activities are taxed, please read our post Your guide to accounting for crypto-assets in Estonia.
Incorporate can handle your company’s virtual currency accounting needs!
Whether you wish to have your own virtual currency exchange, want to invest in virtual assets or practice mining activities in Estonia, doing your virtual currency accounting correctly can be challenging. Our team of accounting experts can keep your business’ accounting records in order.
Please feel free to reach out to us if you would like us to help with your bookkeeping!