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Taxation of returns earned through Crowdestate depends on several factors, including the nature of the investment, the investor's tax residency, and the tax regulations of the countries involved. Below is an overview of how taxes are generally handled:

1. Withholding tax on interest income: When you earn interest income from investments on Crowdestate, the project owner may be required to withhold income tax before distributing payments to investors. The applicable withholding tax rate depends on:

• Project Owner's tax residency:Determines the country where the withholding tax is payable and which country's tax laws apply.
• Investor's tax residency: Different countries have varying tax treaties that can affect the withholding tax rate.
• Type of income: Interest payments and dividend distributions may be taxed differently.

For example, if the project owner is an Italian company, Italian tax regulations apply to determine the withholding tax rate, and the withheld tax is transferred to the Italian tax office.

2. Double taxation avoidance: To prevent double taxation, many countries have treaties that allow investors to offset taxes paid abroad against their domestic tax liabilities. To benefit from these treaties, investors often need to provide a tax residency certificate to the project owner via Crowdestate. This certificate verifies the investor's tax residency and can help in applying the correct withholding tax rate.

3. Tax residency certificate: Obtaining and uploading a tax residency certificate to your Crowdestate account is recommended to optimize your investment income taxation and potentially avoid double taxation. While not mandatory, providing this certificate can ensure the correct withholding tax rate is applied to your returns.

4. Investor's responsibility: It's important to note that Crowdestate does not provide tax advice. Investors are responsible for understanding and complying with their local tax laws regarding income earned through the platform. This includes declaring income, paying any additional taxes due, and claiming tax credits or deductions where applicable. Consulting with a tax professional is advisable to ensure compliance with all relevant tax obligations.

Estonian investment opportunities: No tax is being held on your account. Please do your taxes according to your country's tax regulations. In case you are unaware of the requirements, we advise consulting your country's tax advisor.

Other investment opportunities: Tax is being withheld from the interest paid out. 

Read more about it here: https://blog.crowdestate.eu/en/2020/withholding-tax-and-interest-rates/

If the withholding income tax rate is lower than the investor’s domestic income tax rate, the investor would need to declare the non-taxed part of the income and, if necessary, pay additional income tax.

You will find the materials necessary for the income tax return by clicking on ‘Overview’ – ‘Reports’. There you can draw up an interest statement as well as a balance statement.

Investors with Estonian tax residency:

Estonian investment opportunities: Only private accounts are subject to income tax.

Other investment opportunities: Same as above.

In Estonia the short answer: no

Explanation by the Tax and Customs Board: income tax liability can be postponed by investing in financial assets (e.g. exchange-traded shares, fund units, etc.) openly traded in EEA states or OECD member countries by using an investment account system. An investment account system does not extend to loan-based activities (e.g. through Crowdestate).

Interest or interest on arrears on a loan are subject to income tax on a gross basis and tax liability for interest income from a loan relationship cannot be postponed through an investment account (reinvesting is not tax-exempt.

Untaxed interest or interest on arrears must be declared in the income tax return and income tax must be paid on the basis of the income tax return. If income tax has been immediately withheld by a bank in Estonia, it will be reflected in your pre-filled tax return.

Please do your taxes according to your country's tax regulations. In case you are unaware of the requirements, we advise consulting your country's tax advisor.

In Estonia: Income from the sale and purchase of Crowdestate shares is declared in row 5.6 – Other taxable income not listed above on which income tax has not been withheld.

Please do your taxes according to your country's tax regulations. In case you are unaware of the requirements, we advise consulting your country's tax advisor.

Crowdestate does not declare income – Sponsors of projects do.

In Estonia: The relevant data is available at 5.1 – Salary and other remuneration.

In the case of foreign projects, you must declare income yourself.

Please do your taxes according to your country's tax regulations. In case you are unaware of the requirements, we advise consulting your country's tax advisor.

In Estonia: The refunding of income tax depends on the income tax return for a natural person. If the annual taxable income is less than 6000 euros, the overpaid amount of income tax is returned.

Taxes are calculated in chronological order on all investment accounts and not on each account separately. See table 6.5 for payments to or from your accounts.

Here is an example of Estonian tax residency document and an Italian tax residency document, to get a better understanding of what it should look like. You can get this document from your country's tax office.

Tax residency certificates are issued by the tax department of your country of residence. In most European countries, you can download the certificate yourself from the tax department’s website.

However, if you are unable to download the certificate yourself, you can contact your country’s tax office to obtain the necessary document.

Uploading a tax residency certificate is not mandatory to open an investment account and invest with Crowdestate.

However, we strongly recommend that you obtain and upload your tax residency certificate to enjoy potential financial benefits arising from the avoidance of double taxation of your investment income.