In Estonia, four banks offer transactions in publicly traded assets, but only one of them offers the opportunity to buy cryptocurrency. This option also simplifies issues related to declaring your cryptocurrency income.
To purchase cryptocurrency, there is a huge selection of wallets and brokers that offer to purchase this asset in one form or another. But the simplest and most affordable option for the average person is offered by one of the Estonian banks.
Swed, SEB and Luminor do not offer their clients the opportunity to trade any cryptocurrency. But LHV has two different approaches that can suit both speculators and investors.
LHV offers to buy 15 different cryptocurrencies in whole or in parts. For a transaction, the bank charges the client 0.5% of the transaction amount.
It is not recommended to buy cryptocurrency on an investment account, since until now this asset has not been suitable for use in this system. This means that every year you will have to report to the tax office about profitable transactions with cryptocurrency in columns 6.3 (in the case of Estonian platforms, for example LHV) and 8.3 (in the case of foreign platforms). Unprofitable trades are not taken into account, which means it is impossible to reduce tax-free profit at the expense of a loss.
On Wednesday this week, a law was passed that allows investment associations, not banks, to also offer investment account services, which is likely to soon expand the types of instruments (including cryptocurrency, crowdfunding, etc.), the purchase of which can be registered through an investment account and take advantage of the tax benefits of this system.
But until now, transactions with cryptocurrency must be entered into the tax return independently. In this case, LHV also helps here by offering clients a pre-filled declaration, which can be found in the bank account in the Assets and liabilities column in the “Tax report”. If the information is not automatically reflected in the declaration itself in the environment of the Tax and Customs Board, you can simply copy it from your account at the bank.
In addition to market risks, even in the case of purchasing cryptocurrency through LHV, the risk of various unforeseen circumstances due to which the client may lose the asset cannot be completely excluded. However, the bank independently selects those intermediaries who will store the client’s cryptocurrency.
It is possible to use an investment account
Through the Growth Account (Kasvukonto), which can be registered as an investment account, you can invest in two funds, one of which tracks Bitcoin (Bitcoin Tracker Euro), the other follows Ethereum (Ether Tracker Euro). This can be a convenient and attractive solution for those who already use a Growth Account and an investment account, since in this case you are not buying cryptocurrency, but exchange-traded fund units that are accepted by the investment account system.
However, here the choice is limited to only two cryptocurrencies. You also need to take into account that the costs associated with buying and selling, as well as the fund management fee, will ultimately cost the investor a pretty penny.
Buying on the Growth Account will cost you 1% of the transaction amount, selling – 0.14% or min 9€. There is also a maintenance fee of 0.01% to 0.02% per month depending on the total assets in your account, but there is no maintenance fee if you are under 26 years old.
You can avoid using the Growth Account and directly buy shares of these funds into an investment account, however, here too the additional costs will be large: buying and selling such funds will cost you 0.14% or min 9€.
But no matter how you purchase shares of these funds, you must take into account the management fee, which in both cases is 2.5% per year.
On the other hand, in the case of using an investment account or a Growth Account to purchase shares of these funds, reporting to the Customs and Tax Department is significantly simplified – a report on the investment account at LHV bank is prepared automatically, the client only needs to check its correctness and send it to EMTA, after which the report will already be included in the income statement of the individual.
Moreover, in an investment account, all losses and income are summed up, which makes it possible to take into account unsuccessful transactions and thereby reduce the taxable amount of profit.
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