An entrepreneur account simplifies the payment and reporting of taxes for a private person who provides services to other private persons in areas of activity that do not involve direct expenses, or a private person who sells goods to private persons and legal persons that are self-produced or involve low costs of materials or acquisition.
A person who opens an entrepreneur account does not have to prepare accounting and tax reports – the tax liability is calculated on the basis of the payments to the entrepreneur account. Furthermore, a person who has opened an entrepreneur account is not obliged to register as an entrepreneur.
An entrepreneur account can be opened at LHV Pank.
Business income tax rate
The business income tax rate is 20% of the total amount received on the entrepreneur account if the amount does not exceed 25,000 euros per calendar year. If the income amount in one calendar year exceeds 25,000 euros, the exceeding amount is taxed at a rate of 40%.
If the amount received on the entrepreneur account exceeds 40,000 euros per calendar year, the obligation arises to register as an entrepreneur (self-employed person or a private limited company) in the Commercial Register and as a person liable to value added tax at the Estonian Tax and Customs Board. A registered entrepreneur is required to keep accounts and accounting for taxation purposes.
To whom an entrepreneur account is not useful
It is not possible for the user of an entrepreneur account to deduct costs incurred in the provision of services or the sale of goods, i.e. the total amount received on the account is taxed.
Therefore, an entrepreneur account is not suitable for those whose principal activity is the intermediation of goods purchased elsewhere or for whom the cost of materials necessary for the production of goods or the provision of services represents a large part of the selling price.
In areas of activity with direct input costs, it is more beneficial to be self-employed or operate as a company.
The holder of an entrepreneur account cannot be registered as unemployed and is not entitled to unemployment benefit because the holder of an entrepreneur account is considered a person engaged in entrepreneurship.
The holder of an entrepreneur account may not be a person liable to value added tax or be self-employed in the same or a similar area of activity.
Read more about the entrepreneur account on the website of the Tax and Customs Board.