Withholding of unemployment insurance premium from the income of non-residents
Unemployment insurance premiums withheld pursuant to the Unemployment Insurance Act shall be deducted from the income received by a non-resident natural person during a period of taxation in case it was compulsory to pay the unemployment insurance premium in Estonia. However, when withholding income tax, the payer cannot deduct basic exemption from a non-resident's income taxable in Estonia.
Residents of Contracting States of the European Economic Area
If a natural person who is a resident in another European Economic Area (EEA) member state has received taxable income in Estonia, he or she can make deductions from his or her income taxable in Estonia on the same grounds as a resident of Estonia.
In order to deduct basic exemption, a non-resident who is an EEA resident must submit an application to a person who makes the payment in order to apply basic exemption and a certificate of residency verified by the tax authority of the non-resident’s home country for entry into the database of the Estonian Tax and Customs Board. Parts I, III and V of the certificate of residency form must be completed.
If the person who makes the payments has not deducted basic exemption or has deducted too much, the final amount of the basic exemption in a calendar year is calculated when a non-resident submits the income tax return of a resident natural person to the Tax and Customs Board once a year (by 30 April). As a result, the non-resident will either be liable to additional income tax or will be refunded the income tax overpaid.
In order to prove the income received abroad, a certificate from the tax authority of the country of residence must be submitted to the Estonian Tax and Customs Board. If this certificate does not reflect all the taxable income, it is also necessary to provide a certificate from the tax authority of the country where the income was derived.
Income earned abroad is not taxed in Estonia, but it affects the amount of basic exemption. You can read more about basic exemption and other deductions at the following links:
Contracting States of the European Economic Area
- Member States of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden)
Residents of other countries
Non-residents who are residents in countries other than the EEA Contracting States (e.g. United States of America, Canada, Ukraine, Russia etc.) cannot submit the income tax return of a resident natural person in Estonia, make deductions from the income taxable in Estonia, nor deduct basic exemption from the taxable income.
If income tax has been withheld at the correct rate provided for in the Income Tax Act or tax treaty, a non-resident receiver of income is not required to submit the income tax return in Estonia.
If income tax was not withheld at the rate provided for in the Income Tax Act or tax treaty, a non-resident who is not resident in an EEA Contracting State has to submit a non-resident’s income tax return Form A1 (income from which income tax has not been withheld), V1 (gains from transfer of property) or E1 (business income).
Last updated: 03.02.2022