For many years Estonia remained the leader in the list of the best European crypto jurisdictions. This country was popular among businessmen for its flexible business-oriented environment. But after the recent amendments to the anti-money laundering laws had been made, Estonia ceased to be a prioritized destination for many entrepreneurs. The AML requirements started to be much stricter than before.
Still, it is a pretty affordable and potentially profitable endeavor to launch a crypto exchange here. This country has adopted specialized legislation and has several types of crypto licenses. Practically, stricter regulatory standards may only turn out to be in favor of a business as compliance with those will automatically add credibility to the Estonian crypto projects.
Updated Legal and Licensing Regime in Estonia
Registering a cryptocurrency exchange license in Estonia is possible provided that founders:
- incorporate a separate legal person for that purpose (the most preferred alternative to buying an existing one), a company with limited liability will suit that purpose well;
- investing a starting capital in the amount foreseen by the applicable laws (EUR 100,000-250,000) must be paid in full at the moment of registration;
- hiring personnel qualified for the roles in a crypto project (having a director, compliance manager, bookkeeper, and internal auditor who are residents is a must);
- arranging a local registered address;
- developing workable compliance policies in line with the provisions of the applicable laws (AML/CTF);
- applying advanced technologies to identify customers, keep records about their transactions, and carry out additional checks if needed;
- ensuring cyber security at a high level;
- providing explicit information about the services and products offered through an exchange;
- submitting annual reports and carrying out audits for a business.
Fulfilling these legal demands is only the first step. Subsequently, a virtual asset service provider should do these things on an ongoing basis:
- monitoring of all deals closed through a cryptocurrency exchange;
- forming the profiles of users and identifying the sources of their funds;
- ensuring secure storage of details about the deals and customers;
- carrying out extra verifications in cases of potentially suspicious transactions;
- reporting about allegedly fraudulent or illegal deals to the regulator (the Financial Intelligence Unit).
Accomplishing this scope of actions is not a complicated thing if you have clear guidance. Prifinance attorneys who are experienced in supporting crypto business in Estonia will assist with your business project effectively as well.
How to Register a Crypto License in Estonia
Any business case of registering a crypto license in Estonia is associated with passing this registration procedure:
- Drafting a business plan for an exchange. This document must specify the details about the available resources (technical, IT, capital, etc.), business goals, market assessments, and forecasts. A business plan should be realistic in nature and supported by the respective evidence, including in terms of the resources in possession.
- Opening a corporate bank account to invest enough starting capital needed for the project.
- Creating the background profile of the project. It should contain, among others, details about the promoters, beneficiaries, and managers of the project. All natural persons must submit their up-to-date CVs, fill in questionnaires, provide copies of IDs, and the confirmation of residential addresses. Natural persons have also to confirm their clean criminal records. Corporate entities have to share their statutory documents and confirm good standing. Natural and legal persons must provide their up-to-date contact information (phone number, email, and address). Promoters also need to be ready to confirm the sources and legality of their funds.
- Formalizing the address for a future crypto exchange.
- Opening a company that will act as a future exchange. Buying an existing company is also a possible option.
- Drafting expected internal policies, including KYC procedures.
- Paying a consideration fee and lodging the set of documents for consideration. The regulator may naturally request extra clarifications and documents to confirm some points in a profile.
Tackling all the bureaucratic formalities is not always a possible thing. Experienced attorneys are prepared to guide you in this course and assist with starting a new cryptocurrency exchange swiftly. Generally, it may take approximately 2 months to complete the registration process. But this period may be extended up to 4 months as well if there are any issues with the application to clarify. Submit the details about your project and describe its business objectives. Obtain personalized support workable in your case.
Taxation in Estonia for Cryptocurrency Deals
Taxation of profit derived from the crypto exchange operations is made in line with the general terms. In Estonia, the company’s profits will be taxed only if such have been distributed among the shareholders. The actual tax rates in Estonia are next:
- Profit tax – 0% (undisturbed profits are exempted)
- Income tax – 20%
- VAT – 20%
- Tax on dividends – (1) corporate – 0% (2) individual – 0% or 7%
- Capital gains tax – (1) corporate – not applicable (2) individual – see income tax.
Paying corporate taxes in Estonia has peculiarities. Prifinance attorneys are prepared to clarify such for you during the tax calculation and reporting, especially how the distributed profits of a company are taxed.
Coverage That a Crypto Currency Exchange License in Estonia Provides
If you wish to formalize a license for cryptocurrency in Estonia, the variations of this authorization may cover these types of deals:
