If a person lives in one country and receives income (salary, wages, pension, etc.) from another country, the tax laws and rules of both countries must be taken into account. This may create an obligation to declare income and pay tax in two countries.
However, double taxation is avoided in the country of residence. Although income derived from abroad must be declared, depending on the type of income, the tax calculated in the home state is reduced in the extent of the income tax paid abroad or income already taxed abroad is exempt from tax in the home state.
The list of Estonian bilateral conventions for the avoidance of double taxation with respect to taxes on income and their full texts can be found on the website of Ministry of Finance.
However, if the Income Tax Act provides for taxation and a tax convention provides for exemptions and benefits, the payment must be declared in Estonia. Read more on declaring income on the website of the Tax and Customs Board.
Double taxation of income from abroad of an Estonian resident is avoided in Estonia. Estonian residents must also declare in their tax return any income that is exempt from taxation in Estonia under any tax convention. Although it is not taxed in Estonia, it affects the calculation of the tax-free amount for the remaining income (except for people of pensionable age). More information on the calculation of basic exemption is available at the website of the Tax and Customs Board.
Income tax paid or withheld abroad may be deducted from the income tax payable in Estonia only if the taxpayer is in possession of a certificate from a foreign tax authority or a withholding agent attesting to the payment of income tax or other tax equivalent to income tax.
More information on taxation of income earned abroad by Estonian residents can be found on the Tax and Customs Board’s website.
In order to obtain tax exemptions and reductions applicable under the tax conventions in Estonia, non-residents must submit to the payer a certificate of residence for tax purposes certified by a foreign tax authority.
If the data regarding the country of residence of non-residents receiving income have been entered in the Estonian Tax and Customs Board’s database from a valid foreign certificate of residence for tax purposes, the Tax and Customs Board shall calculate the lower tax rate applicable to the payment on the basis of the tax convention on the return; in the case of an exemption, the amount of income tax is shown as 0.
Therefore, when a valid certificate is not yet available in the Tax and Customs Board’s database, a certificate from the foreign tax authority confirming the tax residence of the recipient must be submitted to the Estonian Tax and Customs Board before the receipt of payment. As a general rule, the certificate of residence for tax purposes is valid for 12 months for a natural person and 36 months for a legal person.
More information on the taxation of non-residents and on non-resident’s deductions from income taxable in Estonia is available on the website of the Tax and Customs Board.
Information regarding the avoidance of double taxation can also be found on the Your Europe portal.
Worker posted to Estonia
A person is considered a posted worker, if:
- their place of work is Estonia and not the foreign country where the employee habitually works;
- employment is of a temporary nature, i.e. the worker does not move to Estonia to live and work there permanently;
- the employee has a specific host in Estonia, i.e. a recipient of the services, such as a parent company or subsidiary belonging to a group.
An overview of the taxation of the remuneration of posted workers can be found on the website of the Tax and Customs Board.
Workers posted from a Member State of the European Economic Area are subject to the social security legislation of only one Member State (the so-called ‘Member State of affiliation’). When an employee pursues activities in two or more Member States, a Member State of affiliation must be designated by filing an application for an A1 certificate to the competent social security institution for the employee’s place of residence. In Estonia, that institution is the [Social Insurance Board] (https://www.sotsiaalkindlustusamet.ee/en). Additional information regarding applications for an A1 certificate can be found on the website of the Social Insurance Board. A1 certificates can be applied for electronically on the state portal, both by the applicant and by entrepreneurs for their employees. The same portal also allows for the cancellation of certificates.
Members of management or supervisory boards
The remuneration of a non-resident member of a management board or supervisory board of an Estonian company is taxed in Estonia irrespective of where the work is carried out. Hence, the remuneration of a member of a management board is taxed differently from that of a managing director. More information on the taxation of the remuneration of members of a management board or supervisory board can be found on the website of the Tax and Customs Board.
People working for an employer established in another Member State of the EU
An Estonian resident who receives remuneration from an employer established abroad has to pay taxes in Estonia. Non-national employers not permanently established in Estonia must be registered as employers, as employers are obligated to declare payments and pay taxes. More information is available on the website of the Tax and Customs Board: Non-resident employer.
Employees who are residents in Estonia are required to submit income tax returns to obtain tax incentives. More information on tax incentives is available on the website of the Tax and Customs Board.
For employers who are resident in Estonia with employees abroad, their remuneration is subject to the taxation law abroad. Non-residents’ remuneration for work done abroad is not taxed in Estonia. Read more from the website of the Tax and Customs Board: For a non-resident.
Entertainers or athletes
The remuneration of non-resident entertainers (artists) or athletes performing in Estonia is taxed in Estonia.
This provision applies to income tax irrespective of whether the recipient has entered into a contract of employment, a contract under the law of obligations, or acts as a natural or legal person, or otherwise. For the purposes of taxing performance fees, the key question is whether the person is present in Estonia and whether the performance takes place in Estonia (this includes performances broadcast on television, on radio, or on the internet).
The person making the payment withholds income tax from performance fees at the rate of 10%. Income tax is withheld from the gross payment.
Documented expenses of business activities (performances) can be deducted from a performer’s remuneration if the non-resident performer is acting as an entrepreneur and the natural person is registered as an entrepreneur in the Estonian commercial register, or in the register of a state which is a contracting party and is registered there as a permanent establishment, and submits an E1 income tax return form. A resident of some other state which is a contracting party to the EEA Agreement submits an E income tax return of an Estonian resident.
Income tax is not withheld if the payment is made:
- to a self-employed person registered in the Estonian commercial register, or in the register of a state which is a contracting party to the EEA Agreement, and the payment is the business income of the recipient;
- to a non-resident’s permanent establishment registered in Estonia.
The remuneration paid to a non-resident artist, athlete, or entrepreneur may, for tax purposes, also be a licence fee (for an exhibition, film screening, performance, installation, use of logo, etc.). Read more from the website of the Tax and Customs Board: Rental income and licence fee.
If the non-resident is outside Estonia at the time of their performance, the received remuneration is not subject to income tax and the payment is not declared in Estonia even if the paying agent is from Estonia.
Depending on the tax convention concluded with a particular country, various restrictions may apply to the taxation of performance fees in Estonia if the activity is financed by one or both of the states or by a local government.
More information on the taxation of remuneration paid to non-resident artists or athletes for performances in Estonia is available on the website of the Tax and Customs Board.
Civil servants abroad
Tax conventions usually foresee that an official’s remuneration is taxed only in the state for which work is carried out.
However, if the work is carried out abroad and the civil servant is a resident and a national of that state, the civil servant’s remuneration is taxed only in the country of residence.
Unemployed persons looking for jobs abroad
In Estonia, income tax is levied on allowances under the Unemployment Insurance Act (allowances for unemployment, redundancy, or due to an employer’s insolvency).
Submitting an income tax return
You can submit your income tax return from 15 February of the year following the taxable period:
- in the Tax and Customs Board’s e-services environment e-MTA, where you need to identify yourself for signing in by using an ID-card, Mobile-ID, Smart-ID or EU eID
- in the service bureaus of the Tax and Customs Board
- by mail at Lõõtsa 8a, 15176 Tallinn.
We recommend that you submit your tax return in the e-services environment, if possible, because there can be long queues at the service bureaus, especially at the beginning of the income tax return submission period.
Where to find information and help
The Tax and Customs Board will help you with questions of determining tax residency, taxation and income declaration.
Customer Support of the Tax and Customs Board
Appeals
If you consider that your rights or freedoms have been violated by an administrative act or measure of a tax authority, you can contest the decision, or file an appeal in the courts.
The appeal must be filed in Estonian and in writing at the Estonian Tax and Customs Board:
- by email: [email protected];
- by post: Lõõtsa 8a, 15176 Tallinn.
An appeal against an administrative act must be filed within 30 days of the date of notification or delivery of the administrative act, and an appeal against a measure must be filed within 30 days of the date on which the person appealing becomes or should have become aware of the measure. If the period for filing an appeal is not complied with, the tax authority may, on duly justified grounds, reinstate the period not complied with on application by the party concerned.
More information on appealing administrative acts can be found on the Tax and Customs Board’s website.
Forms
References
- Taxation of a non-resident
- Conventions for the avoidance of double taxation
- Resolution of disputes resulting from tax treaties