Estonian Parliament adopted draft changes to the Income Tax Act on 13 November 2024, which will provide more flexibility to the investment account regime, but include also other changes in the taxation of investment income derived by individuals. Hereby we provide an overview on most significant changes which generally will be effective retrospectively from the beginning of 2024:
- The income tax exemption on compensation derived for non-pecuniary harm is extended from 2024 also to such compensation, which has been ordered by any entity established for out-of-court dispute resolution (e.g. labor dispute commission).
- In addition to credit insitutions, the investment account may be opened from 2024 in any payment institution, e-money institution or investment company. The account opened at the investment company before 1 January 2024 may be declared as an investment account in the annual individual income tax return to be submitted for 2024.
- The financial assets of the investment account may include pledge securities, certain regulated crowdfunding instruments and from 2025 also cryptocurrency assets.
- From 2025, the financial assets of the investment account exclude the share or stock of the unlicensed small asset fund.
- From the income derived through the investment account, in addition to the transaction fees, from 2024 it is allowed to deduct any fees directly related to the use of the account (e.g. administration fee), as well as the costs of conversion of currency incurred upon the purchase of financial assets. Also, without using the investment account, the individual is entitled to include in the acquisition cost of securities any fees related to the use of security account, as well as the administration fee of the crowdfunding or cryptocurrency platform.
- In addition to the official exchange rate of European Central Bank, from 2024 it is allowed to account the income derived by individuals in foreign currency according to the effective exchange rate used for the transaction.
From 2025, the individual is allowed to set off any gains and losses also upon investments made to the crowdfunding or cryptocurrency, even without using the investment account regime.