Is crypto legal in Estonia?

Cryptocurrency activity is legal in Estonia. Since November 2017, businesses can obtain licenses to exchange virtual currency, process transactions on behalf of clients, provide wallet services, and other activities. Crypto is defined as a digital value that can be transferred, stored, or traded. It is not official money or legal tender, but is fully recognized under Estonian law.

Crypto taxes in Estonia

Estonia does not have a crypto-specific tax framework. Companies dealing with cryptocurrency follow standard Estonian tax rules. Crypto businesses become tax residents upon incorporation and must register with the Estonian Tax and Customs Board (ETCB).

Key taxes applied to crypto businesses:

• Corporate Income Tax (CIT) of 0%-20% on distributed profits. Estonian companies are not taxed on retained or reinvested profits. Tax applies only when profits are distributed, such as through dividends.
• Social tax of 33% on employee remuneration. Resident companies and non-residents with a permanent establishment in Estonia must pay social tax on salaries and certain other payments.
• Value Added Tax (VAT) of 20%, exempt for cryptocurrency trading. VAT registration is required if turnover exceeds €40,000 per year. Buying and selling cryptocurrencies is exempt from VAT, in line with European Court of Justice rulings, but other goods or services remain subject to standard VAT rules.
• Withholding tax of 7%-20% depending on payment type. Withholding tax applies to certain payments such as dividends, interest, royalties, and fees. Dividends already taxed at the reduced CIT rate are charged 7% when paid to residents or non-residents.

In the table below, you will find a brief overview of taxes for crypto related activities.

See official ETCB guidance for more details.

Crypto regulations and compliance rules in Estonia

Since July 1, 2024, the Crypto Asset Market Act (CAMA) governs crypto-asset activities in Estonia. All crypto-asset service providers (CASPs) must obtain a license from the Financial Supervision Authority (FSA). The FSA oversees licensing, governance, capital requirements, and client protection. The Financial Intelligence Unit (FIU) continues to supervise existing license holders until July 1, 2026. Companies must also comply with EU directives and international sanctions regulations.

Regulatory bodies and laws:

• Financial Supervision Authority (FSA) is responsible for licensing, supervision, and enforcement of CASPs under CAMA and the EU’s MiCA.
• Financial Intelligence Unit (FIU) oversees AML/CTF compliance for existing license holders until July 1, 2026.
• MLTFPA (Money Laundering and Terrorist Financing Prevention Act) defines virtual currency and outlines AML/CTF obligations.
• EU Directive 2015/849 establishes a European legal framework for virtual currencies and AML/CTF rules.
• The International Sanctions Act, 2019, requires monitoring of transactions for compliance with international sanctions.
• Crypto Asset Market Act (CAMA) covers licensing, governance, capital requirements, client protection, and corporate rules for crypto-asset activities.

Key compliance requirements for companies dealing with crypto:

• Obtain a license from the FSA for CASP activities.
• Implement enhanced KYC and AML procedures.
• Maintain a local presence and meet capital requirements.
• Align operations with the EU MiCA framework.
• Monitor transactions for sanctions compliance.

Conclusion: the legality of crypto in Estonia

Estonia provides a clear legal framework for cryptocurrency, covering licensing, AML/CTF, and EU MiCA requirements. Its tax system is favorable to crypto companies, especially because retained and reinvested profits are not taxed. However, rules and regulations can change over time. Anyone planning to engage in crypto activities should seek professional legal and tax advice to meet compliance.