certificate of tax residency

NATURAL PERSONS

A natural person is resident if one of the conditions is met: – the place of residence is in Estonia – the residence time in Estonia is at least 183 days per year

LEGAL PERSONS

A legal person is a resident of Estonia based on the place of registration of the company

§ 6. Resident (1) A natural person is a resident if his or her place of residence is in Estonia or if he or she stays in Estonia for at least 183 days over the course of a period of 12 consecutive calendar months. A person shall be deemed to be a resident as of the date of his or her arrival in Estonia. Estonian diplomats who are in foreign service are also residents. A resident natural person shall pay income tax on all income derived by him or her in Estonia and outside Estonia, regardless of whether the income is listed in §§ 13–22 or not. [RT I, 06.07.2012, 1 – entry into force 01.04.2013]

(2) A legal person is a resident if it is established pursuant to Estonian law. European public limited companies (SE) and European associations (SCE) whose seat is registered in Estonia are also residents. A resident legal person shall pay income tax on the objects of taxation prescribed in §§ 48–52 and withhold income tax from payments listed in § 41.

Source:  Income Tax Act Estonia – read full act here

ASK ABOUT TAX RESIDENCY

DOES THE E-RESIDENCE CARD AFFECT MY TAX RESIDENCE?

The e-Residence card has no effect on the residence. This is only a document that allows you to sign an electronic signature and correctly identify when setting up a company or operating a bank account. Thanks to the e-Residence card, we have access to the Estonian market.

CAN I GET THE CERTIFICATE OF TAX RESIDENCY SIGNED AND STAMPED BY REVENUE?

Yes – we offer this service. You can order a residence certificate with the official stamp and signature. You will need it when making payments to non-residents – e.g. if you avoid paying withholding tax in other countries.

WHICH TAXES ARE PAID BY NON-RESIDENT IN ESTONIA?

The non-resident pays taxes only on remuneration obtained from sources located in Estonia – e.g. if the workplace is in Estonia – the non-resident has a limited tax liability in Estonia, and unlimited in the country where he is a resident, e.g. in Poland or Germany.

DIRECTOR’S FEE FOR NON-RESIDENT

Director’s fee is taxed in the Estonia – is not important you are resident or non-resident. You need pay usually Income Tax in Estonia and social securities depending on your employment status. If you have other functions in other countries, you can present A-1 certificate and be exempt from the social security.

COMPANY HAS THE TAX RESIDENCY IN BOTH COUNTRIES (…)

It may turn out that a limited company (legal entity) will have a residence not only in Estonia, but also in another country. It is the agreements on the avoidance of double taxation that resolve the conflict of tax residence – and in particular Article 4.

I WILL CHANGE THE TAX RESIDENCY AS NATURAL PERSON – WHAT TO DO?

You need file the “R” form and sent it to EMTA (Revenue) when you change the tax residency or leave the country. This notification of tax authorities is mandatory.

FEE FOR CERTIFICATE OF RESIDENCE

DISCLAIMER

Non-residents  have a limited tax liability in Estonia, only the Estonian-source income is taxed.

Thus, where by reason of the provisions of agreement between two countries who have concluded a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income , a person is a resident of both contracting states, his status shall be determined according to article 4 of the tax treaty.
If the residency prescribed on the basis of an international agreement  differs from the residency prescribed pursuant to the Estonian Income Tax Act, the provisions of the international agreement apply.

NB! The foreign tax authorities could determine PE – permanent establishment – to be in their country. If the Estonian tax board recognizes during control that Estonian company created by e-resident is operating in a foreign country and should pay it’s taxes there, EMTA will share that information with other country’s tax authorities.

Not every business model is suitable for the Estonian company. Our employees will advise you on how to minimize international taxation risks.

EXAMPLE OF CERTIFICATE OF RESIDENCY AND TAX LIABILITY FROM ESTONIA

WHAT INFORMATION DOES THE CERTIFICATE CONTAIN?

The certificate of residence and tax liability is issued by Tax and Customs Board from Republic of Estonia called in Estonian “Eesti Maksu- ja Tolliament”.

On the certificate of residence you can see the company name (“nimi”), company number (“registrikood”) and registered office address (“aadress”). The Tax and Customs Board confirms that OU company is a resident of Estonia according to the Estonian Income Tax Act for the purposes of the Estonian income taxation.

Every valid certificate of residency from Estonia needs to be signed by officer and to be stamped.