Tax Summary:

1. Personal income tax – 20%
2. Corporate income tax – 0% until profits are distributed as dividends; 20% is levied on the company’s distributed profits; 14% applies to companies making regular profit distributions

What law/s governs VASP activities?

1. Money Laundering and Terrorist Financing Prevention Act (“MLTFPA”)
2. Guidelines for submission of an application for the authorisation of a virtual currency service provider or an application for amendment of the authorisation

What activities are included in VASP services?

The MLTFPA applies to the economic, professional and official activities of the following persons:  providers of a virtual currency service (“VASPs”).

According to § 3 of the MLTFPA: 

1. Virtual currency service means a service mentioned in clauses 10–10-3 of this subsection.
2. Virtual currency wallet service means a service in the framework of which keys are generated for customers or customers’ encrypted keys are kept, which can be used for the purpose of keeping, storing and transferring virtual currencies.
3. Virtual currency exchange service means a service with the help of which a person exchanges a virtual currency against a fiat currency or a fiat currency against a virtual currency or a virtual currency against another virtual currency.
4. Virtual currency transfer service means a service that allows a transaction to be conducted electronically at least in part through the virtual currency service provider in the name of the initiating party with the aim of moving the virtual currency to the recipient’s virtual currency wallet or virtual currency account, regardless of whether the initiator and the recipient are one and the same party or whether the initiator and recipient are using the same service provider.
5. Organization, in the name or on behalf of an issuer of virtual currency, of a public or targeted offering or sale related to the issue of such currency, or the provision of any related financial services (ICO).

Who is the VASP regulator?

1. Financial Intelligence Unit (“FIU“)

What is the procedure for registering a VASP for a local company?

Requirements for granting a VASP authorization in Estonia:

1. Register as a Private limited liability company (OÜ). 
2. At least 1 shareholder (natural person or corporate entity; no restrictions to citizenship or residence) and at least 1 management board member (can be the same as the shareholder, but only a natural person). Company management must have residency in Estonia. Members of the management board of a VASP must possess a higher education and at least two-year specialized work experience.
3. Share capital must be at least 100 000 euros or 250 000 euros depending on the service provided. The share capital must be fully paid up in monetary form before applying for a crypto license in Estonia.
4. Having a physical  office in Estonia.
5. A business plan for at least two years.
6. Availability of own funds (depending on the services provided and the volumes).
7. The presence of an AML officer who must reside in Estonia. He can hold the position only in 1 licensed company.
8. Documentation compiled in accordance with § 13 of the MLTFPA to ascertain the appetite for risk, and concerning risk analysis.
9. Obligation to audit annual accounts.
10. Having an internal auditor.
11. Availability of a payment account opened in a credit institution, e-money institution or payment institution that has been established in Estonia or in an EEA state that provides cross-border services in Estonia or has established a branch in Estonia.

The application for authorisation of a VASP must be filed via the web portal of the register of economic activities or via a notary.

Is there any specific authorization required for a VASP from another EU member state to provide services in this jurisdiction?

According to § 70 of the MLTFPA a person who holds the following is not subject to the authorization obligation:

1. Authorization granted by the financial supervision authority of a contracting state of the European Economic Area based on which the person is authorized to operate in Estonia via a branch or across borders, provided that the Financial Supervision and Resolution Authority has been notified of such operations.
2. Or who provides the services specified in subsection 1 of this section within the group.

What is the liability for the activities of a VASP from another EU member state without local registration/authorization in this jurisdiction?

§ 372 of the Penal Code:

1. Activities without an activity license in a field where such activity license is required is punishable by a fine of up to three hundred fine units or by detention.
2. The same act if committed within a field of activity relating to provision of credit, insurance or financial services is punishable by a pecuniary punishment or up to three years’ imprisonment.
3. An act specified in subsection 1 of this section, if committed by a legal person, is punishable by a fine of up to 32,000 euros.
4. An act specified in subsection 2 of this section, if committed by a legal person, is punishable by a pecuniary punishment.
5. A court may, pursuant to the provisions of § 83 of this Code, apply confiscation of a substance or object which was the direct object of the commission of an offense provided for in this section.

Manimama Legal & Growth Agency provides a gateway for the companies operating as the virtual asset wallet and exchange providers allowing to enter to the markets legally. We are ready to offer an appropriate support in obtaining a license with lower founding and operating costs. We offer KYC/AML launch, support in risk assessment, legal services, legal opinions, advice on general data protection provisions, contracts and all necessary legal and business tools to start business of virtual asset service provider.

The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.