Lately, the investment components and the value of various cryptocurrencies and other virtual assets (tokens, NFTs, etc.) have significantly increased. The modern finance world is becoming more and more intertwined with innovative solutions and blockchain technologies – today, it is rare if an investment portfolio does not contain any crypto assets. People often ask us if, under the law of the Republic of Estonia, any restrictions apply to the legal persons registered here when investing in crypto assets and other virtual assets.
Our answer is – yes, of course, all Estonian companies, regardless of their legal status, are entitled to invest their accumulated funds in cryptocurrency, tokens, NFTs or other virtual assets. And that’s not all – the Estonian tax legislation does not tax the re-investment of profit received from the economic activities of a company – all retained earnings’ tax rate is 0% (the profit of a company will not be taxed with income tax until the decision of payment of dividends).
However, it should be noted that a company’s board is obliged to strictly follow the principles of due diligence, avoid investing their resources in unknown cryptocurrencies and questionable blockchain projects and use only safe and reputable crypto exchanges or other platforms. Additionally, purchases of any crypto derivatives (e.g., utility tokens or NFTs) shall be transparent and an investment context shall be determined. Otherwise, the owners of the company but also creditors in case of bankruptcy are entitled to request the board members to compensate for any damages caused by the impetuous investment decisions.
Do You Need a VASP license?
You don’t need a license or permission to buy cryptocurrency or to invest the company’s funds in virtual assets. Every company has the right to freely make its own investment decisions, including investing in modern and developing technologies and innovative investment instruments.
A licensing issue might arise when a company decides to offer cryptocurrency exchange or storage to third parties as part of its economic activities. If a company only uses crypto exchange and investment platform services offered by third parties, they don’t need a VASP (virtual asset service provider) license.
Infrastructure for Investments
You need an infrastructure for transactions with cryptocurrencies and virtual values – company accounts on a crypto exchange or cooperation with other cryptocurrency investment platforms.
Not all banks and payment systems support EMI and PSP cryptocurrencies, and this is somewhat understandable – virtual currencies are high-risk assets, they provide anonymity and are often used for illegal purposes (money laundering, financing terrorism, tax evasion, concealment of criminal proceeds, etc.). Due to this, we recommend considering all possible channels for storing and later withdrawing cryptocurrency on crypto exchanges before investing to avoid unnecessary difficulties, delays, and inconveniences later.
Our specialists have years of experience in supporting crypto companies and blockchain projects. If you need help with opening a bank account in banks that accept cryptocurrency and blockchains or a company account on trustworthy crypto exchanges, our consultants are happy to answer your questions and will offer you the most effective solutions.
We don’t recommend that you use trading accounts or other accounts belonging to individuals for purchasing cryptocurrency. Transferring money from a company to these accounts or crypto wallets is seen as paying dividends or remuneration (a company is a taxable person) or a private person receiving income to their trading account from the investment (a private person is obliged to pay their taxes).
Accounting for Crypto Assets
In addition to the previously mentioned matters, it is worth noting that recording the investment assets of a company, including the proper calculation of its profit or loss, is an inseparable part of accounting and financing. The statements on cryptocurrency accounting and crypto assets need to involve each transaction, taking into consideration the exchange rate at the time, and display all crypto wallet balances in their base currency, euros.
Since accounting cryptocurrency and its assets and composing financial reports is an own specialisation in the provision of accounting services, we recommend that you contact accountants with the relevant skills and experience – our accounting specialists have experience in supporting cryptocurrency projects and blockchain start-ups since 2017 and they are ready to offer you high-quality accounting support.
If you wish to start a company in Estonia to invest in cryptocurrencies, tokens, NFTs or other crypto assets or you need legal or accounting consultation, feel free to contact our consultants!