Crypto Regulation and Taxes by Country
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The crypto market may be global, but every country has taken its own approach to this new financial industry. Some countries make it easy for crypto businesses and investors to operate in order to promote growth. Others take a harder line and have laid out many hoops for crypto users to jump through.
In this article, we’ll take a closer look at crypto regulation and crypto taxes in Estonia, Lithuania, Czech Republic, Poland, Slovakia and Bulgaria.
Estonia has positioned itself as one of the best countries for tech startups in Europe. The country initially brought its startup-friendly approach to the crypto industry, but has changed its tune in recent months.
The country’s new regulations took effect on June 15, 2022. Now, crypto companies in Estonia must meet stringent transparency and anti-money laundering requirements. They cannot have anonymous accounts, which were previously allowed.
In addition, there are minimum capital requirements for crypto businesses. Exchanges, wallet services, and token issuers must have at least €100,000 in capital. Transfer services must have at least €250,000 in capital.
To receive a license from Estonia’s Financial Intelligence Unit, the country’s financial watchdog, companies must pay an application fee of €10,000 and hire an internal auditor. The business must also have a physical, registered office in Estonia.
Right now, it is estimated that acquiring a license will take 4-5 months. The country awarded its first crypto license under the new regulations in September.
Crypto businesses in Estonia are taxed the same way as other corporations. Most companies pay no taxes on profits. Instead, they pay a 20% tax on dividends or profit distributions.
Lithuania is another country that has generally taken a welcoming approach to cryptocurrency businesses. The country updated its crypto regulations in June, with most of the new requirements for crypto businesses taking effect November 1, 2022.
The country now offers 2 types of crypto registrations: Cryptocurrency Exchange Authorization and Crypto Wallet and Custodian Services Authorization. Both registrations are overseen by Lithuania’s Financial Crime Investigation Service. To obtain a crypto registration, businesses must first register as a Virtual Assets Service Provider (VASP).
VASPs are required to have at least €125,000 in capital and anonymous accounts are not allowed. They are also required to have a Lithuania-based AML-officer, also named Senior manager. who works solely for one crypto business. AML-Officers are not company heads, but rather employees with a high position. VASPs must have a senior manager who resides in Lithuania, but the company does not need to have a registered office in the country.
Crypto businesses are taxed similar to other businesses in Lithuania. For most companies, the income tax rate is 15%. Small businesses with 10 or fewer employees and less than €300,000 in revenue may be taxed at a rate of 0-5%. Dividends are also taxed at a 15% rate.
The Czech Republic offers an extremely lenient regulatory environment for cryptocurrencies. Cryptocurrencies are not recognized as legal tender and are instead classified as commodities. Cryptocurrencies are not regulated as their own asset category, as they are in other countries.
New crypto businesses in the Czech Republic can establish themselves as limited liability companies, following the same process as any other type of business. The capital requirement is 1 CZK, equivalent to about €0.04. There is also a government registration fee of 6,000 CZK, or around €243.
Crypto businesses must have a registered office in the Czech Republic for at least 1 year. It need not be a physical office and companies are not required to have local employees.
Importantly, crypto companies must follow anti-money laundering and know your customer requirements set forth by the EU.
All crypto businesses pay the Czech Republic’s 19% corporate income tax rate, which applies to both business income and capital gains.
Poland has classified crypto businesses as their own category of financial businesses and introduced a flexible regulatory structure.
All crypto businesses in Poland must register with the country’s Register of Virtual Currencies, which is maintained by Poland’s Tax Administration Chamber. There are multiple types of crypto licenses that companies can choose when registering.
Crypto businesses can be set up as a limited liability company, just like any other type of business in Poland. However, there are a few requirements specific to crypto businesses.
Crypto companies are required to report annual financial statements. Only crypto companies with more than 50 employees or more than €5 million in annual revenue must conduct annual audits.
Crypto businesses pay a 19% corporate income tax rate. For businesses with annual revenue of €2 million or less, the tax rate is discounted to 9%.
Cryptocurrency in Slovakia is overseen by the National Bank of Slovakia. However, the National Bank of Slovakia has not issued any regulations or licensing requirements for crypto businesses. In the absence of country-level regulations, crypto businesses must adhere to EU anti-money laundering requirements.
Crypto businesses can be set up as private joint-stock companies and are required to register with Slovakia’s Trade Licensing Authority. This registration comes with a €5,000 capital requirement and businesses must have a physical office in Slovakia. However, they are not required to have local employees.
All businesses in Slovakia, including crypto businesses, pay a corporate income tax rate of 21%.
Bulgaria is another country that does not explicitly regulate cryptocurrencies. The country does not recognize Bitcoin or other cryptocurrencies as legal tender and has not made efforts to categorize digital assets separately from existing financial services.
As a result, crypto companies in Bulgaria face minimal requirements. There are no licenses required to open a crypto business. A new company can be set up as a limited liability company with a €1 capital requirement and no physical office or local employees in Bulgaria.
Notably, Bulgaria is part of the EU, so crypto businesses must comply with the EU’s anti-money laundering requirements for crypto businesses.
Crypto businesses pay the standard corporate income tax rate of 10%, plus an additional 5% tax on dividends.
Crypto Regulations Compared
The table below summarizes crypto regulations and taxes in Estonia, Lithuania, Czech Republic, Poland, Slovakia and Bulgaria.
|Business registration||Limited liability company||Limited liability company||Limited liability company||Limited liability company||Private joint-stock company||Limited liability company|
|Capital requirement||€100,000-€250,000||€125,000||1 CZK||5,000 PLN||€5,000||€1|
|Local office required||Yes||No||No||No||No||No|
|Anti-money laundering officer required||Yes||Yes||No||No||No||No|
|Local employee required||Yes||Yes||No||No||No||No|
|Tax rate||20% dividend tax||0-15% income tax, 15% dividend tax||19% income tax||9-19% income tax||21% income tax||10% income tax, 5% dividend tax|
Crypto regulation in Europe is constantly evolving, with each country setting their own rules alongside the EU’s rules for all member states. Some countries offer more lax regulatory environments than others, so it’s important for crypto businesses to fully understand the regulatory landscape.