Residency

The concept of a resident plays an important role in taxation, as the extent to which a person’s income is taxed depends on whether the income is received from all over the world or only from Estonia.

Resident

A resident is a person with unlimited tax liability who pays income tax on income received both in Estonia and in a foreign country. However, double taxation is avoided.

Non-resident

A non-resident in Estonia pays income tax only on the income received in Estonia

  • The permanent establishment of a non-resident is not an Estonian resident, but it is taxed in the same way as a resident.

E-resident

An e-resident is not an Estonian resident, but a non-resident who in Estonia pays income tax only on the income received in Estonia. E-residency does not automatically exempt from taxation elsewhere.

E-residency enables digital administration in Estonia, including digital signature of documents, establishment of companies, use of Internet banking, declaration of taxes, etc. The tax residency of an e-resident depends on other factors such as the place of residence, staying in the state and personal connection with the state. 

An Estonian company established by an e-resident is a resident of Estonia. However, if the business activities of such a company are carried out elsewhere or managed from outside Estonia, the income received in a foreign country will be taxed in the foreign country and Estonia will guarantee the avoidance of double taxation.

Therefore, the e-resident's Estonian company is most probably subject to taxation also in a foreign country. E- residency in Estonia does not automatically exempt from tax liability abroad. Neither does it guarantee that taxation takes place only in Estonia.

In order to use the income tax incentives and reductions arising from the conventions for the avoidance of double taxation concluded with Estonia, a non-resident has to provide the Estonian Tax and Customs Board with a certificate of residency confirmed by the tax authority of a foreign country.

Determining residency

The instruction for determining the residency for tax purposes of a natural person explains when a natural person is considered a resident, gives an overview of the circumstances of the change of residency and the obligation to declare and pay income tax.

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Last updated: 19.04.2021

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