Residency is very important in taxation because it is the deciding factor as to the extent of the Estonian taxation of a person's income.
A non-resident only pays income tax in Estonia on Estonian income.
An e-resident is not a tax resident of Estonia but a non-resident who is only subject to Estonian taxation on Estonian income. E-residency does not provide an automatic exemption from taxation elsewhere.
A natural person is a resident if his or her place of residence is in Estonia or if they stay in Estonia for at least 183 days over a period of 12 consecutive calendar months.
Resident natural person of another EEA Contracting State who submits an income tax return for a resident
A resident natural person of another state of the Contracting Party to the EEA Agreement who has received income taxable in Estonia can take into account tax incentives (including the basic exemption) in proportion to the share of the income taxable in Estonia in his or her taxable income for the period of taxation on the following conditions:
- If the person has derived at least 75 per cent of his or her total income in Estonia, he or she can use all the deductions provided for in Chapter 4 of the Income Tax Act.
- If the person has received less than 75 per cent of his or her total income in Estonia, he or she can use, as deductions, the basic exemption and the increased basic exemption in the event of pension, in the case the person receives pension payments.
In order to use tax incentives, a non-resident is obliged to submit an income tax return for a resident natural person (hereinafter ‘tax return’). A tax return is submitted on income subject to taxation in Estonia, on income tax withheld in Estonia, on certified deductions in Estonia and on income received in a foreign state (which is not taxed in Estonia, but is important in calculation of the proportion).
Spouses may submit a joint income tax return, if one of the spouses is a resident and the other is a resident of another Contracting State who has received the income taxable in Estonia or if both are residents of another Contracting State and have received the income taxable in Estonia. In the case of a joint tax return of spouses, separate forms on income shall be fulfilled. An overpaid amount of the income tax shall be refunded to the bank account of one of the spouses.
You must state “Yes” into the box of the income tax return for a resident natural person, “Are you a resident natural person of another state of the Contracting Party to the EEA Agreement, who wants to have deductions in Estonia, and who has received income in Estonia according to the conditions specified in subsections 311 (2) or (3) of the Income Tax Act”.
If the natural person does not have Estonian personal identification code, then the registry code given by the Estonian Tax and Customs Board shall be stated in the tax return. If the person has not yet received the registration code by the Estonian Tax and Customs Board for the time of fulfilling the tax return, it can be obtained after filing a corresponding application. The registration code issued by the Estonian Tax and Customs Board can be checked via e-inquiry „Mitteresidendi isikukoodi/registrikoodi otsimine" (“Search for non-resident personal identification code/registry code”) (in Estonian only).
A resident of a Contracting State fills in an income tax return on taxable income in Estonia, if the person has also received income outside Estonia, it shall be declared in an income tax return, table 8.9. The person’s income received outside Estonia shall not be subject to taxation in Estonia, but for the application of an incentive, the Estonian Tax and Customs Board may require a relevant certificate on the income received outside Estonia or an income tax return submitted in the country of residence.
You may not fill in other tables (8.1–8.8) in the income tax return on the income received outside Estonia.
Expenses made by a resident of a Contracting State are stated in tables 9.1 to 9.7 on the basis of supporting documents therefor.