An e-resident’s digital identity card gives foreign citizens safe access to the Estonian e-services.
Information on the Estonian e-residency can be found on the website of e-residency and webpage "Application for e-resident’s digital identity card".
Using Estonian Tax and Customs Board’s electronic services
E-residents can use the Estonian Tax and Customs Board’s electronic services in the e-Tax/e-Customs environment on the same conditions as the persons with the Estonian ID card. For instance, it is possible:
- to submit all tax and customs declarations
- to register their company liable to value added tax
- to pay taxes and view tax payment history
- to send documents and notifications to the Estonian Tax and Customs Board
- to view documents and notifications sent by the Estonian Tax and Customs Board
- to compile certificates (e.g. on the absence of tax arrears) for submitting to business partners etc.
- as a representative of a company, to authorize private persons to use electronic services on behalf of the company, etc.
A contract for the use of the e-Tax/e-Customs has to be concluded in order to use the Estonian Tax and Customs Board’s electronic services.
How to conclude a contract for the use of e-Tax/e-Customs?
A private client (a natural person) can conclude the contract on the Internet. Entering the e-Tax/e-Customs and signing the electronic contract is possible with the help of an e-resident’s identity card.
An account will be created for the private client in the e-Tax/e-Customs and the client can start using all private client’s electronic services.
In case an e-resident has established a company in Estonia, the business client’s electronic services can be used after creating a business client’s account in e-Tax/e-Customs, which can also be done electronically. By signing the contract, the business client will be created an account for using all business client’s electronic services. In order to use the services, a legal representative has to authorize private persons, including themselves.
Estonian e-residency and taxes
An e-resident is a non-resident according to Estonian tax legislation. Only income derived in Estonia is taxed in Estonia.
In order for a non-resident to use income tax incentives and reductions arising from conventions for the avoidance of double taxation concluded with Estonia, a certificate of residency approved by a foreign tax authority has to be submitted to the Estonian Tax and Customs Board.
The Estonian e-residency does not automatically exempt from taxation elsewhere.
An Estonian company established by an e-resident is an Estonian tax resident. In case business activities of this company are carried out elsewhere or the company is managed from outside of Estonia, the income received in a foreign state will be taxed in this foreign state and Estonia will ensure avoidance of double taxation. Therefore, an Estonian company established by an e-resident may likely have tax obligations in foreign states and the Estonian e-residency does not automatically exempt from foreign tax obligations nor ensure taxation only in Estonia.
The profit of an Estonian resident company derived abroad is taxable in Estonia, but in Estonia profit is taxable at the moment of distribution, for example when profit is distributed as dividends. Still, double taxation is avoided. For example, if the business activities of an Estonian resident company are carried out in a foreign country and the profit taxable abroad is paid out as dividends in Estonia, these dividends may be exempted from taxation in Estonia.
If dividends are paid to the e-resident owner of the Estonian resident company, there will be no income tax withheld on dividend income of the recipient. Only the Estonian company pays corporate income tax at the moment of dividend payment. An e-resident natural person has to pay income tax on dividends received from the Estonian company in their resident country and usually cannot take into account the corporate income tax paid in Estonia to avoid double taxation.
If an e-resident natural person receives employment income from an Estonian resident company, from work done while staying in Estonia, the income will be taxable by with employment taxes in Estonia. In case of fees to a member of the management or controlling body, income is taxable in Estonia, no matter if the work is done in Estonia or outside.
The resident country of an e-resident will also tax the same income, but the income tax paid in Estonia will usually be taken into account.
An e-resident has established an Estonian company, which has received profit of 1000 euros in year 2015 and 500 euros in 2016.
Income tax is not paid in 2015 and 2016, since the profit is not taken out. In 2017, dividends in the amount of 1200 euros are distributed to the e-resident owner.
Income tax of 300 euros, calculated as 1200 × 20 ÷ 80, has to be paid by the company in the month following the dividend payment in 2017.
The e-resident receives dividends in the amount of 1200 euros, no income tax will be withheld.
If an e-resident receives income of 100 euros every month for performing activities of the member of the board of the Estonian company, income tax at the rate of 20% will be withheld and social tax of 33% paid by the Estonian resident company in Estonia.
The cost for the company is 133 euros, the e-resident receives 80 euros.
If profit of the Estonian resident company is derived in a foreign country through a permanent establishment there, dividends distributed in Estonia may be exempted in full from income tax in Estonia.
If an e-resident manages an Estonian company from abroad, the foreign income tax has to be paid from profit derived outside Estonia.
Avoidance of double taxation
Latvia as a country of the place of management of an Estonian resident company of an e-resident (Latvian tax resident), applies the income taxation rules of Latvia to the profit of the permanent establishment of the Estonian company in Latvia.
If the profit of the permanent establishment of the Estonian company in Latvia is 100 euros and corporate income tax paid by the Estonian company in Latvia is 15% and the Estonian company pays dividends in the amount of 85 euros, there will be no additional income tax in Estonia assessed to the dividends paid from the Estonian company to the e-resident owner.
The profit of the Latvian permanent establishment must still be declared on form TSD Annex 7 when received and dividends declared on form INF 1, when distributed without income tax.
If an e-resident registers as a sole proprietor in Estonia, it is accompanied by a commitment to pay advance payments of social tax 4 times a year. The size of advance payment actually does not depend on the size of income, it is set each year with the state budget. In 2017, the amount of advance social tax payment is 1702.80 euros per year (425.70 euros per quarter).
- Sole proprietors' tax liabilities » (in Estonian)