Here is a short summary how peer-to-peer lending is taxed in Estonia for a private person, and where to find the relevant data on our platform.
This summary is based on information from the Estonian Tax and Custom Board. This applies only to Estonian residents.
What type of personal income is taxed in Estonia?
According to Estonian Income Tax Act chapter 3 Taxation of income of resident natural persons - § 12. Income of resident natural person - taxable income in Estonia includes income from employment, business income, INTEREST (§ 17), rental income and royalties, capital gains, pensions and scholarships, dividends, insurance indemnities and payments from pension funds and income of a legal person located in a low tax rate territory. § 17. Interest Income tax is charged on all interest accrued from loans, leases and other debt obligations, as well as securities and deposits, including such amount calculated on the debt obligations by which the initial debt obligations are increased. Interest shall also include monetary payments made to unit-holders on account of a contractual investment fund, excluding the payments specified in subsection 15. The fine for delay (late fee) payable in the event of delay in performance of a monetary obligation is not deemed to be interest. Read in detail: Income Tax Act in English, Tulumaksuseadus (TuMS) in Estonian.
How is income in peer-to-peer lending taxed in Estonia for a private person?
The income tax rate in Estonia is 22%. In peer-to-peer lending the yearly declaration consists of:
- Earned interest (received interest payment from the borrower)
- Earned interest from defaulted loans
- Secondary Market capital gains (profit earned from selling and buying loan shares)
For Bondora investors that means declaring “Total Interest Received”. This column consists of all earned interest and earned interest from defaulted loans and you’ll find that information from the Cash Flow page. If you read on we’ll show you where and how to find the data you need from Bondora. If your net profit is purely virtual and your strategy is to reinvest all your returns, it doesn’t matter – you still have to declare the earned interest. If for some reason you haven’t earned any profit in a calendar year, e.g. when the borrower is on payment holiday and no interest has been received, then you have no duty of declaration – you only pay on actual received interest payments. Keep in mind that you cannot use Investment Account (§172) to invest on Bondora. And when declaring your income as a private person you cannot offset any losses or fees against earned interest and income tax is payable on gross interest received.