Crypto regulations and taxes by country

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The crypto market may be global, but each country has taken its own approach to this new financial industry. Some countries make it easier for crypto businesses and investors to operate in order to promote growth. Others take a harder line and have set up plenty of hoops for crypto users.

In this article, we will take a closer look at crypto regulation and crypto taxes in Estonia, Lithuania, Czech Republic, Poland, Slovakia, and Bulgaria.

Estonia

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 tone in recent months.

The country’s new regulations came into effect on June 15, 2022. Now, crypto companies in Estonia must meet strict transparency and anti-money laundering requirements. They cannot have anonymous accounts, which were previously allowed.

Additionally, there are minimum capital requirements for crypto businesses. Exchanges, wallet services and token issuers must have a capital of at least €100,000. Transfer services must have a capital of at least €250,000.

To receive a license from the Financial Intelligence Unit of Estonia, the country’s financial watchdog, companies must pay an application fee of €10,000 and hire an internal auditor. The company must also have a physical registered office in Estonia.

Currently, it is estimated that acquiring a license will take 4-5 months. The country granted its first crypto license under the new regulations in September.

Crypto businesses in Estonia are taxed the same as other companies. Most businesses pay no income tax. Instead, they pay a 20% tax on dividends or profit distributions.

Lithuania

Lithuania is another country that has generally taken a welcoming approach towards 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 supervised by the Lithuanian Financial Crimes Investigation Service. To obtain a cryptographic record, businesses must first register as a Virtual Asset Service Provider (VASP).

VASPs must have at least €125,000 in capital and anonymous accounts are not permitted. They are also required to have an AML agent based in Lithuania, also referred to as a senior manager. who only works for a crypto company. AML-Officers are not business leaders, but rather employees in 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 like other businesses in Lithuania. For most businesses, the tax rate is 15%. Small businesses with 10 or fewer employees and a turnover of less than €300,000 may be taxed at a rate of 0 to 5%. Dividends are also taxed at a rate of 15%.

Czech Republic

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 class, as they are in other countries.

New crypto businesses in the Czech Republic can incorporate as limited liability companies, following the same process as any other type of business. The required capital is 1 CZK, or approximately €0.04. There is also a government registration fee of 6,000 CZK, or approximately €243.

Crypto businesses must have a registered office in the Czech Republic for at least 1 year. It does not have to be a physical office and businesses are not required to have local employees.

It is important to note that crypto companies must follow anti-money laundering and be aware of your customers’ requirements set 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

Poland 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 Virtual Currency Registry, which is maintained by Poland’s Tax Administration Chamber. There are several types of encryption licenses that companies can choose from when registering.

Crypto businesses can be incorporated as a limited liability company just like any other type of business in Poland. However, there are a few requirements specific to crypto companies.

Crypto companies are required to publish annual financial statements. Only crypto businesses with more than 50 employees or more than $5 million in annual revenue are required to perform annual audits.

Crypto businesses pay a corporate income tax rate of 19%. For companies whose annual turnover is less than or equal to 2 million euros, the tax rate is reduced to 9%.

Slovakia

Cryptocurrency in Slovakia is supervised 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 regulation at the national level, crypto businesses must comply with EU anti-money laundering requirements.

Crypto businesses can be established as private joint stock companies and must register with the Slovak Business Licensing Authority. This registration comes with a capital requirement of €5,000 and companies must have a physical office in Slovakia. However, they are not required to have local employees.

All companies in Slovakia, including crypto companies, pay a corporate tax rate of 21%.

Bulgaria

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 classify digital assets separately from existing financial services.

As a result, crypto companies in Bulgaria face minimum requirements. No license is required to open a crypto business. A new company can be set up as a limited liability company with a capital requirement of €1 and without a physical office or local employees in Bulgaria.

Notably, Bulgaria is part of the EU, so crypto businesses must comply with EU 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 Comparison

The table below summarizes the crypto regulations and taxes in Estonia, Lithuania, Czech Republic, Poland, Slovakia, and Bulgaria.

EstoniaLithuaniaCzech RepublicPolandSlovakiaBulgariaCompany RegistrationLimited Liability CompanyLimited Liability CompanyLimited Liability CompanyLimited Liability CompanyPrivate Joint Stock CompanyLimited Liability CompanyLicense RequiredYesYesNoYesNoNoLicense Cost€10,000€4,200N/A€2,500N/Year/ACapital Team€100,000-€122.50 €PL50.50€1 CZKN 1Local office requiredYesNoNoNoNoAnti-money laundering agent requiredYesYesNoNoNoLocal employee requiredYesYesNoNoNoTax rate20% tax on dividends0-15% tax on income, 15% tax on dividends19% tax on income9-19% income tax21% income tax10% income tax, 5% tax on dividendsConclusion

Crypto regulation in Europe is constantly evolving, with each country setting its own rules alongside EU rules for all member states. Some countries offer more lax regulatory environments than others, so it is important for crypto businesses to fully understand the regulatory landscape.

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