The Estonian case anno 2021
Cryptographic money trading is gaining more and more popularity, and buyers may wonder if and when they need to pay taxes on cryptocurrency. In summary, a tax liability arises in three cases: by converting cryptocurrency into a common currency, exchanging cryptocurrency for another cryptocurrency, or using cryptocurrency to pay for goods or services.
In the case of cryptocurrency, only those transactions from which income is earned are taxed, and each transaction must be assessed separately. For example, if a person bought one Bitcoin for 18,000 euros and sold it for 10,000 euros, he or she does not have to declare the transaction because the person did not earn any income from it. However, if the situation is the opposite, ie a person bought one Bitcoin for 10,000 euros and sold it for 18,000 euros, then the 8,000 euros earned must be declared on the personal income tax return and 20% income tax must be paid.
Thus, the income earned is the difference between the acquisition cost and the sale price of cryptocurrency. The purchase price or income received must be converted into euros, taking into account the cryptocurrency exchange rate valid on the date of receipt of income or expense. If the transaction is made on market terms, it is possible to use the exchange rate of the environment in which the transaction took place, and if the transaction environment does not use the euro, the income must be recalculated.
When exchanging one cryptocurrency for another, you must also monitor the market price and the income or profit earned. Take, for example, a situation where a person bought two Litecoin for 260 euros, which he exchanged for 0.2 Etherum a few months later. At the time of the swap, the market price of the two Litecoin had risen to € 500. Thus, the person benefited from the exchange transaction in the amount of EUR 240 (ie EUR 500–260), which must be declared and subject to income tax.
When paying for goods or services with cryptocurrency, the income earned, ie the difference between the purchase price of the goods or services received and the cryptocurrency used, must be calculated. For example, in a situation where a person had one Bitcoin, which he purchased in June 2017 for 2,500 euros and used it to buy a new car in…