General information on taxation of income derived outside Estonia
In addition to income received in Estonia a person is required to declare his or her income derived from abroad from different sources: income from employment, dividends and business income, commercial or residential lease, royalties, remuneration paid to artists or sportsmen, interest, pensions, fringe benefits, cultural, sports or scientific awards, benefits, support, gambling winnings, gains from transfer of property, insurance indemnities, income of shareholders and other income derived abroad which are subject to taxation in Estonia.
A proportional part of income of a legal person located in a low tax rate territory and controlled by an Estonian resident is also deemed to be income.
If a person stays outside Estonia longer than 183 days in the period of 12 consecutive months while his or her place of residence in Estonia is maintained, all worldwide income should be declared in Estonia and additionally assessed taxes must be paid, if necessary. From the point of charging income tax, a person's place of residence or actual stay in Estonia (in other words, a person's personal and economic relations with the state) is more relevant than his or her citizenship.
An Estonian resident natural person is an Estonian resident or a person who has stayed in Estonia for at least 183 days in 12 consecutive months.
Upon taxation, in order to avoid double taxation of income received in different countries, we proceed from the national provisions laid down for avoidance of double taxation and the international conventions for avoidance of double taxation.
Upon calculation of income tax in Estonia the income tax already paid on income derived abroad will be taken into account. If the amount of income tax paid abroad is smaller of the amount of the income tax calculated on the income tax return in accordance with the Estonian Income Tax Act, the taxpayer is required to pay the difference by which the amount of tax calculated in Estonia exceeds the income tax paid abroad.
Income tax paid or withheld abroad may be declared and taken into account in Estonia only on the basis of the documents certifying the payment of income tax.
If the social security payments and contributions (pension, health, maternity, unemployment insurance premiums, accident at work or occupational disease insurance) have been paid abroad, the payment of which is mandatory according to foreign legislation or under an international agreement, the aforementioned payment or tax may be deducted in Estonia from the taxable income derived abroad (it is to be declared in table 9.7 of the income tax return form for income derived outside Estonia).
In Estonia the social security payments and contributions paid abroad are not deducted from the income exempt from income tax.