Estonia company accounting and tax

Estonian accounting rules, taxation system and legal obligations

  • Estonian taxation system

    • Estonia accounting tax legal and compliance servicesEstonia’s taxation system is relatively simple and has flat corporate and income tax rates;
    • Being an Estonian e-resident does not make you a tax resident of Estonia, unless your place of residence is physically in Estonia or you stay in the country for more than 183 days a year. By default, a company registered in Estonia is a tax resident;
    • If our Client permanently manages his/her Estonian company from a foreign country and sells services and goods in that respective country, there is a risk that the local authority of the foreign country will ask that a local subsidiary of the Estonian entity be registered in order to pay local income taxes;
    • Estonia’s main tax benefits are: i) there is no CIT on income, ii) there is 20% CIT payable only on distributed profit at the end of each year, iii) a reduced CIT rate of 14% and 7% can be availed in certain cases, iv) Estonia tax residents are not required to pay personal income tax from dividends earned, v) income from subsidiaries is tax-free (only if there is a Double Taxation agreement between those countries);
    • The standard Value Added Tax (VAT) in Estonia is a flat 20%. The minimal threshold for mandatory VAT registration is €40,000;
    • Estonia does not levy withholding taxation on payments including: i) dividend payments ii) interest other than interest derived by a non-resident investor;
    • Capital gains are subject to the standard corporate tax rate of 20% only if they include profit distribution;
    • Royalties and technical service fees paid to a non-resident are subject to a 10% withholding tax, unless reduced by a tax treaty;
    • Salary taxation: i) regular salaries are taxed at 33% only if the individual is a tax resident of Estonia, ii) board member salaries are taxed at 20% (even if the foreigner doesn’t live in Estonia);
    • There is an opportunity to apply for a reduced rate of 14% or 7% from the 3rd year of your company operation, assuming the dividends were distributed after the 2nd year of operation.
  • Estonian accounting rules

    • Companies annual reports must be submitted every year. The deadline for submitting the annual report to the Estonian Tax and Customs Board is 6 months after the end of the fiscal year;
    • Late payments of corporate tax will incur a 0.06% interest per day on the total amount due;
    • VAT returns must be filed and paid by the 20th day of the following month. There is a penalty of €100 per declaration for delaying VAT submission;
    • Any amount not distributed can be re-invested in the business;
    • Losses cannot be carried forward or backward in Estonia;
    • For those companies, who provide digital services & goods across EU, it is advisable to register for VAT MOSS (Mini One Stop Shop). Instead of having to register for VAT in every EU country, the company can just register for VAT MOSS and submit a quarterly report to the tax authority. Note, the monthly VAT reporting is still required;
    • Estonian company must obtain EORI number (European Union registration and identification number) if it undertakes the import or export of goods into or out of the EU;
    • Estonia does not implement net wealth tax, which is applicable to other EU countries, including France, Spain and Netherlands;
    • Estonia has signed double taxation avoidance agreements with 57 countries including i) Austria ii) Mexico iii) India and iv) Hong Kong;
    • Healy Consultants Group PLC will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparing financial accounting records and iv) preparing forecasts, budgets and performing sensitivity analysis;
    • It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants Group PLC’s help to clarify your annual reporting obligations.

Estonia company legal and compliance

  • Company regulation

    • The Centre of Registers and Information System allows both residents and non-residents to view i) specific company’s name, address and registration code; ii) registered office address; iii) director personal information and iv) current tax status;
    • As with many EU countries, the minimum share capital requirements in Estonia are i) €2,500 for a limited liability company and ii) €25,000 for a public limited liability company;
    • All Estonia public limited liability companies must appoint a company auditor to comply with all the auditing requirements for their Estonian company. This said, limited liability companies must also appoint a company auditor if one of the following conditions are met:
      • The issued share capital exceeds €25,000;
      • The company annual turnover exceeds €650,000;
      • The total assets exceed €330,000;
      • The total number of employees exceed 10.
  • Staff regulations

    • The main labor regulating body in Estonia is the Ministry of Health and Labour and the main statute and law regulating employment is the Employment Contracts Act;
    • The labor regulations do not require employment contracts to be in writing if they do not exceed two weeks;
    • The minimum probation (trial) period cannot exceed four months or a half of the period of a fixed-term contract. This said, during trial period the minimum termination notice is 15 working days;
    • The minimum wage in Estonia is fixed at €500;
    • In accordance with the Estonian Employment Contracts Act the standard work week: i) cannot exceed on average a maximum of an average of 48 hours per week over a four-month period and ii) five working days starting from Monday;
    • In case of separate agreement, the total working hours per week can reach to 52 hours. This said, an employee will be entitled to terminate the contract with two-week notice;
    • In Estonia all employees are granted:
      • Up to 28 calendar days of paid annual leave;
      • 12 days of national holidays;
      • 182 days of paid sick leave paid at 70% monthly wage after the 4th day and;
      • 140 workdays of paid maternity leave;
    • Contract termination can be concluded via the following methods:
      • Instant dismissal – in cases of gross misconduct;
      • Employee resignation – with written notice of at least 14 working days;
      • Termination on notice – with a minimum notice of at least 15 calendar days by the employer;
    • All claims from labor conflicts must be deposited to the regulating body – Labour Inspectorate no less than 30 days from termination of contract;
    • All employees being laid off are entitled to receive severance pay of at least one-month salary;
    • The minimum legal age for employees is fixed at 15 years old, while 60-year-old workers have the right to a pension if they have covered the minimum working period.
  • Other business regulations

    • Estonia joined the European Union on the 1st of May, 2004 and the Eurozone on the 1st of January, 2011. Consequently, multiple business laws follow the European Union guidelines;
    • The country is part of the Schengen Area since 21 December 2007 allowing border-free travel of up to 400 million citizens;
    • Estonia is a founding member of the Council of Baltic States since 1992. The mission of this organization is the safety, cultural identity and the development of the member states;
    • Estonia joined the Nordic Investment Bank since 2005. Today this financial institution with 8 country members aims to improve the economic competitiveness of the Nordic region;
    • Estonia becomes part of the multinational military alliance named North Atlantic Treaty Organization (NATO), agreeing on the terms of mutual defense between member countries;
    • Estonia is a member of the World Intellectual Property Organization, since 1994 which consequently allows i) non-resident companies to apply for patent or a trademark free and ii) foreigners the same intellectual property protection rights as Estonian nationals;
    • Estonia accepted the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention). As a result, arbitration case awards made in countries that are party to this convention should be enforceable in Estonia according to implied regulations.

Contact us

For additional information on our corporate legal and compliance services in Estonia, please contact our in-house country expert, Mr. Seth Ochieng, directly:
client relationship officer - Seth
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