Virtual Office FAQ

 

Taxis in Estonia (12)

A natural person is a resident if one of the following conditions is met:

  • place of residence is in Estonia
  • stays in Estonia for at least 183 days over the course of a period of 12 consecutive calendar months. A person shall be deemed to be a resident as of the date of his or her arrival in Estonia.
  • Estonian diplomats who are in foreign service are also Estonian residents.

Taxation requirements also apply according to residency status.

Corporate tax status is determined by where the turnover is generated, where the profits are distributed, and where the employee is resident in the country.

Tags: Estonia, Tax

The standard rate of VAT is 20%, the reduced rate is 9% and 0% in some cases.

The taxable period is one calendar month, and VAT returns must be submitted to the tax authority by the 20th day of the month following the taxable period.

Usually, Tax and Customs Board will register with the VAT for those companies that engage in economic activities or prove their commencement (§ 20 (4) of the Value Added Tax Act).

As a result, the registration of non-operating ready-made companies is usually not possible for the sale of companies by sellers of the companies.

It is possible to buy formerly operating companies, including VAT registered companies. In this case, the registration of the company as a VAT taxpayer will be retained.

Applicants must have access to “Submit a VAT registration application”.

In order to grant access, the authorized person must enter the e-MTA as a representative and select “Settings”> “Access Rights”> “Representative Access Rights”.

On the Access Rights Administration page, you must enter the user ID of the user to be authorized and select “Access to VAT registration” under the “Individual rights” section.

Log in: https://maasikas.emta.ee/v1/login?authst=eitUBZa5iT

 

Residents pay tax on their worldwide income. Taxable income includes, in particular, income from employment (salaries, wages, bonuses and other remuneration); business income; interest, royalties, rental income; capital gains; pensions and scholarships (except scholarships financed from the state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.

The personal income tax is withheld from the employees’ gross salary every month and paid by the employer.

Non-residents pay personal income tax only on their income received from Estonian sources. Taxable income in Estonia includes:

  • income from work under a labour contract or contractor’s agreement in Estonia
  • income from business carried out in Estonia
  • interest income received from Estonia (only if it is substantially higher than that of similar debt claims)
  • royalties
  • income from the lease of assets located in Estonia
  • gains from disposal of assets located in Estonia
  • directors’ fees paid by Estonian enterprises; » income of a sportsman or an artist from his or her activities in Estonia
  • pensions and scholarships

As a non-resident, you can sign in to the Estonian Tax and Customs Board’s self-service environment and use the e-services if you have:

  • the eID of one of the following EU Member States:
    • Germany (National Identity Card, Electronic Residence Permit)
    • Italy (Carta di identità elettronica)
    • Spain (DNIe)
    • Belgium (Belgian Citizen eCard, Foreigner eCard)
    • Luxembourg (Luxembourg eID card)
    • Croatia (Personal Identity Card (eOI)).

Applying for Estonia’s e-Residency

If you are unable to use the above-mentioned authentication methods, we recommend you apply for Estonia’s e-Residency. E-Residency offers foreigners secure access to Estonia’s e-services. Holders of the e-resident’s Digi-ID card can digitally sign documents and use the Digi-ID to sign in to all portals and information systems that recognize the Estonian ID-card.

You can apply for an Estonian e-resident’s Digi-ID electronically at https://e-resident.gov.ee/. Consult the same web page for additional information on e-Residency and instructions on how to submit an application.

Liability is a type of liability arising from a tax relationship that extends to a third party’s legal representative, chief executive officer or asset manager (the addressee of the liability decision) to pay the company’s tax debt. It is an obligation on the part of the corporation, ie the said one presupposes the validity of the tax debt of the company (Supreme Administrative Court decision no. 3-3-1-75-09).

Liability proceedings are a sub-category of debt recovery and are not tax assessments. The liability procedure involves an analysis of the circumstances underlying the third party’s liability, which may result in the issuance of a liability decision to the obligated new subject or the termination of the liability procedure due to lack of grounds.

It is clear from §§ 96 (1), 40 (1) and 8 (1) of the Taxation Act that the liability of a member of the management board in the recovery of his tax debt is as follows:

  • the member of the Management Board has willfully or through gross negligence violated his or her duties
  • breach of the obligation to ensure the timely and full fulfillment of the financial and non-financial obligations under the Taxation Act and tax laws
  • the default has resulted in a tax debt

The rate of social tax is 33% (20% for social security and 13% for health insurance). Besides the social tax, unemployment insurance tax at a rate of 0.8% must be paid on the gross salary (an additional 1.6% is withheld from the employees’ salary).

Employers registered in Estonia (including the permanent establishments of foreign entities) must pay social tax on all payments made to employees, except on those specifically exempted by law.

E-residency in Estonia does not automatically mean tax residence. It only provides the opportunity to use the e-services that the Estonian state offers. Among them is the establishment of the company. If your turnover is less than EUR 40,000 per the calendar year, you don’t need to add VAT to your invoices. If the turnover is generated outside Estonia, you do not have to add VAT to your invoices if you exceed this amount. If the employees do not work in Estonia, the labour tax according to Estonian law does not have to be taken into account.

 

On 1 July 2009, the Economic Operators Registration and Identification System (EORI) was introduced in all EU Member States for identification of economic operators as regards their customs related activities. Economic operators engaged in foreign trade who register themselves in the EORI system are given unique identification numbers (EORI numbers), which will be forwarded to the EORI central database.

The use of an EORI number enabling to identify economic operators within the entire EU customs territory became mandatory for all economic operators engaged in import or export of goods, transit transportations or when performing other customs related activities.

An e-resident is a non-resident according to Estonian tax legislation.

Only income derived in Estonia is taxed in Estonia.

If there is no activity or income derived from Estonia, taxes should be paid in the country where the service is provided or activity is done or income is derived from, the pure e-residency alone does not influence the foreign or Estonian taxation.

The Estonian e-residency does not automatically exempt from taxation elsewhere.

An Estonian company established by an e-resident is an Estonian tax resident.

NB!

  • e-Residency will not change your personal tax residency
  • A company registered in Estonia is automatically a tax resident in Estonia
  • Your personal residency may trigger tax residency for your company in your place of residence as well

An e-resident is a non-resident according to Estonian tax legislation.

Only income derived in Estonia is taxed in Estonia.

If there is no activity or income derived from Estonia, taxes should be paid in the country where the service is provided or activity is done or income is derived from, the pure e-residency alone does not influence the foreign or Estonian taxation.

The Estonian e-residency does not automatically exempt from taxation elsewhere.

An Estonian company established by an e-resident is an Estonian tax resident.

0%

There is no corporate income tax on retained and reinvested profits.

Tax on distributed profits is 14-20%.

Distributed profits include:

  • corporate profits distributed in the tax period
  • gifts, donations and representation expenses
  • expenses and payments not related to business
  • transfer of the assets of the permanent establishment to its head office or to other companies

Dividends paid to non-residents are no longer subject to withholding tax, irrespective of participation in the share capital of the distributing Estonian company. However, various withholding taxes may still apply to other payments to non-residents if they do not have a permanent establishment in Estonia or unless the tax treaties otherwise provide.

As the tax period for corporate entities is a month, income tax must be returned and paid monthly by the 10th day of the following month.

It is possible to run your company without any corporate income taxation at all.

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