Examples

Example where a resident of another Contracting State receives from Estonia the taxable income exceeding 75 per cent

An Estonian employer employed a Latvian resident for five months in Estonia. The employer withheld every month an income tax 20 per cent on the payment in the amount of 1000 euros, deducting 1.6 per cent of unemployment insurance premium withheld, therefore the amount of income tax withheld is 984 euros = (5000 – 80) * 0.20. The Estonian taxable income of the Latvian resident was 5000 euros, in Latvia he earned the same year totally 1000 euros.

The taxable income in Estonia is therefore 83.33 per cent of the taxable income for the taxation period and the Latvian resident has the right to submit in Estonia an income tax return for a resident natural person and deduct from the taxable income of the person in Estonia the expenses 83.33 per cent allowed for a resident according to the Income Tax Act. The Latvian resident has two children under the age of 17 and he has made training expenses in the amount of 200 euros.

Income in Estonia 5000
Income tax withheld in Estonia during a year 984
Unemployment insurance premium 80
Basic exemption 2040
Increased basic exemption in the case of a minor 1848
Training expenses 200
Total deductions 3486,53 [(2040 + 1848 + 200) * 0,8333] + 80
Taxable income in Estonia 1513,47 (5000 - 3486,53)
The final income tax 302,69 (1513,47 * 0,20)
Income tax to be refunded 681,31 (984 - 302,69)



Example where a resident of another Contracting State receives from Estonia the taxable income less than 75 per cent

The income received in a foreign state is totally amounting to 14 500 euros (is declared in table 8.9). Thus, the taxable income of a German resident for a taxation period forms totally 32 500 (18 000+14 500=32 500) euros wherefrom his/her Estonian income (18 000) forms 55.38 per cent. Therefore the non-resident received less than 75 per cent from his total income in Estonia and he or she can use the basic exemption as a deduction. The basic exemption is calculated to the German resident in proportion to the share of his or her Estonian income (in the case of this example – to the extent of 55.38 per cent) in his total income

Estonian income 18 000
Income tax withheld in Estonia during a year 3600
The basic exemption taken into account as a deduction 2040 * 0,5538 = 1129,75
Taxable income in Estonia 16 870,25 (18 000 - 1129,75)
Final income tax 3374,05 (16 870,25 x 20%)
Income tax to be refunded 225,95 (3600 - 3374,05)

 

 

15.02.2017