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Your Ultimate Guide to Accounting With Enty

Accounting can be confusing at times. To help you figure everything out and save your precious time, we’ve prepared a detailed guide to accounting with Enty

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General information about taxes in Estonia

Taxes overview

There are 3 main types of taxes that most companies in Estonia will have to pay

Corporate taxes

By general rule, Estonia taxes distributed profits at a 20% tax rate, while in fact the real tax reaches the 25% mark. This means that if a business in Estonia earns $100 and pays that $100 to its shareholders, the business would be required to pay a tax of $25 on the distributed profit.

But what makes the Estonian tax regime so great is that there is a 0% tax rate on reinvested profits. This means that if a business decides to reinvest $100, it will not have to pay tax on that $100.

Decisions regarding profit distribution must be made during the creation of an annual report. Basically, this means that profit distribution in the form of dividends can be done only after your company is at least 1 year old, completed share capital contribution, and hires someone in Estonia.

To summarize:
If you do not distribute profits, you don’t pay anything — 0%!
If you do distribute them to your shareholders, you pay 20 Euros out of 80 Euros

VAT in Estonia

VAT, or value-added tax, is a consumption tax placed on a product whenever a value is added at each stage of the supply chain, from production to the point of sale.

The standard VAT rate in Estonia is 22%. In some cases, it might be reduced to 9% or 0%. Let’s take a quick look at cases when reduced VAT is applied.

Social Tax

If you have hired employees or paid salary to yourself, let’s take a look at applicable taxes. Taxes for Employees

In this case, the main difference will depend on tax residence of your employee
Estonian Tax Resident

General information about accounting in Estonia

General requirements

By default, any company registered in Estonia has an obligation to:

submit annual reports
preserve accounting source documents for seven years as (this refers to bank statements, invoices, agreements, and any other accounting documents)
if a company is VAT-registered, monthly accounting is required

Types of reports

In practice, there are 4 different types of reporting:

Annual Reports: must be submitted by all Estonian companies
VAT Returns (monthly reports): must be submitted by VAT-liable companies
OSS/IOSS declarations: must be submitted by participants of OSS/IOSS schemes
TSD declarations: must be submitted by companies that have hired employees who are registered in Estonia

Annual report

According to the Accounting Act, any company registered in Estonia must prepare an annual report for the fiscal year at the end of each financial year (generally January, 1 — December, 31). The annual report should be filed six months after the end of the financial year of your company (generally June 30th).

If your company was incorporated after June 30th, the report for the first 6 months will be included in the next year’s report.

The annual report should be filed with the Commercial Register and consists of:

Balance sheet
Income statement
Management report (for small-size companies)

VAT Declarations (Monthly Reports)

If a company obtains a VAT number, it must submit VAT declarations. VAT returns must be submitted to the tax authority (even for the months when there might be nothing to declare) by the 20th day of the month following the taxable month.

In a VAT return (or ‘declaration’), a company gives the tax authorities information about:

their taxable (taxed or exempt) transactions;
the VAT that they have both charged their clients (output tax) and received from their suppliers (input tax);
the amount of VAT payable (or refundable).

Basically, VAT declaration calculates how much VAT a company should pay or be reimbursed.

You can submit your VAT tax returns online through the Estonian Tax and Customs Board platform. When doing so, you have to use a form called KMD for your VAT declarations. Additionally, if you had sales or purchase invoices for over EUR 1,000 with domestic businesses in a single month, you should include them in an Annex KMD INF, which is submitted along with your KMD form.

If you provide services to VAT-registered customers in other EU Member States, make sure to report these in the monthly intra-Community supply declaration, the deadline for which is the 20th of the following month.

OSS/IOSS declaration

OSS and IOSS declarations are specialized VAT reporting systems designed to simplify and streamline cross-border transactions within the EU.

The OSS declaration is for businesses providing digital services, telecommunications, broadcasting, or selling goods to consumers in multiple EU Member States, while the IOSS declaration applies to businesses selling goods to EU consumers from outside the EU.

The filing frequency for these declarations varies. OSS declarations are filed quarterly. In contrast, IOSS declarations are typically submitted on a monthly basis to report and pay VAT on imported goods sold to EU consumers.

TSD declaration

The TSD is a declaration used to report income and social tax, unemployment insurance premiums, contributions to the mandatory funded pension, as well as interests, dividends, and benefits. It needs to be submitted by the 10th day of the month following the month the payment was made. To file such a type of report, we need you to provide us with a bank statement and an employment agreement (can be generated on our platform).

What costs are considered business expenses?

Business expenses are expenses that have a genuine business purpose and are directly related to the company's activities. Here is a list of expenses that can be covered by a company

Expenses covered by your customers,
fees of subcontractors,
professional and support services,
marketing costs,
hardware and software,
business trip expenses (transportation/accommodation/related costs),
participation in business-related events and trainings,
bank and transaction fees,
office costs and supplies,
business lunches & gifts (taxable),
salary (taxable),
relevant taxes (salary taxes, dividend taxes, fringe benefits, etc.)

You should have proper documentation (invoices, contracts) and evidence to support the expenses as business-related.

Can I reimburse the expenses made prior to the establishment of the company?

Before proceeding, it is important to review the articles of association to ascertain whether a predetermined amount is eligible for reimbursement from the company. This sum should have been specified during the company's incorporation and registration processes. Alternatively, shareholders can create a memorandum of association outlining the projected foundation expenses and the corresponding payment procedure (Commercial Code § 138). These anticipated costs can be fully reimbursed to the shareholders without incurring additional taxes.

Expenses must have a genuine business purpose and be directly related to the company's activities. You should have proper documentation (invoices, contracts) and evidence to support the expenses as business-related. Notably, please be aware that state fees associated with company formation are not considered viable for reimbursement. Nevertheless, other costs, such as those incurred for website development or branding are eligible for reimbursement.

Do I need to do an audit?

The audit obligation applies to an accounting entity in whose annual financial statements at least two of the indicators listed below exceed the following values:

annual net sales of 4 000 000 euros and more;
balance sheet volume of 2 000 000 euros and more;
average number of employees is at least 50.

Penalties

Failure or delay in VAT return submission or payment will result in a maximum penalty of €2,000. Submission of an incorrect VAT return will result in a maximum penalty of €3,200. Deliberate inaccuracies will cost your company a maximum of €32,000. Alongside, there is an interest charge on late payment of VAT due at 0.06% per day.

Company liquidation

The company is required to submit all missing annual reports and VAT declarations, if any. After that, a final balance sheet and liquidation report must be prepared. Our accountants will help you prepare these in the process of liquidation.

Enty Accounting plans

What plans do you have?

We have 3 subscription plans that include accounting services:

Standard (from €51/month or €612/year): for companies without a VAT number, includes yearly accounting reports and a yearly 1-hour consultation with an accountant.
Pro (from €93/month or €1116/year): for companies with a VAT number, includes monthly VAT returns, a monthly 1-hour consultation with an accountant, and yearly accounting reports.
E-commerce (from €110/month or €1320/year): suitable for companies trading on e-commerce platforms – includes all services from Pro plan.

Also, every plan includes payroll services (filing the TSD declaration) for 1 employee.

How do I find my plan?

Choosing the right plan depends on your business:

1. If you sell on e-commerce platforms like Shopify, WooCommerce, Amazon, or use payment platforms like Stripe or PayPal – you should opt for the E-commerce plan.
2. You should opt for the Standard plan if your company does not have VAT number and

has a few sales and purchases per year,
is on the product development stage (no sales yet), or
is a dormant or holding company

3. In all other cases, it is better to opt for the Pro plan.

The other thing to keep in mind is that every subscription plan has different document packages, and the actual subscription fee depends on the number of documents that are available to you. So, you can start with a lower-tier document package, and then upgrade it when you understand how many documents you need.

What is a document in your plans?

By document, we mean a document that supports any outgoing or incoming transaction from your bank account. The more transactions you have, the more documents you provide to support them. The document package in our subscription plan is the number of documents that Enty is ready to process while preparing an accounting report without any extra charge.

Please note that bank statements and employment contracts are not counted as ‘documents’ for the sake of the document package. Also note, that some transactions do not require supporting documents.

I have no transactions

Even if your company is dormant or has no transactions, you still need to submit an annual report. If your company has a VAT number, you can cancel the VAT registration; otherwise, you will be obliged to submit nil VAT returns as well. Anyhow, Enty will need bank statements from your banks to make sure that there was no activity.

I have thousands of transactions

If you have so many transactions, you might be using payment platforms like Stripe or Paypal to deal with them. All payment platforms keep records about all your sales and refunds. We will need a sales report (or transaction report) in CSV from your sales platform with information by country in order to prepare an accounting report. We process this type of document within our E-commerce plans. If you have any purchase invoices, please provide them separately.

Can I extend my document package?

Basically, if you have more documents than are available in your document package, you have two options:

Upgrade your document package to a higher-tier one; see all the plans and document packages here. If you need a custom document package – contact the client manager and we will make a special offer for you
You can stay on the current plan and document package and pay €5 for every extra processed document.

Do you work only by subscription?

We can offer you one-time services; please see the pricing here. It is more beneficial to subscribe if your company is active and needs ongoing accounting support.

Will you process the payroll for me?

Yes, we will process the payroll for you if you are going to pay yourself a board member salary, which is taxable in Estonia, or if you plan to employ Estonian residents. One payroll is included in the subscription plan. All other payrolls are charged extra; see pricing here.

Do you offer crypto accounting?

Yes, we do. Crypto accounting is handled at x2 Enty rates. The rules for crypto accounting are the same as for regular fiat accounting: you’ll need to submit annual reports and VAT reports, if required. We will need all invoices and transaction lists from the wallet with the starting and ending balances for the reporting period in order to prepare your reports.

Accounting on Enty

What is Enty?

Enty is not a simple software to prepare accounting reports when only you as a company bear the full responsibility for the content of the declaration. In case of accounting, we are an accounting firm, and we have rules to follow to keep our reputation intact before the Estonian Tax Office. Therefore, we are committed not to submit declarations that do not reflect reality. This is why we have a very thorough checking process in place.

How is accounting handled by Enty?

The accounting process on Enty can be divided in 3 steps:

1. Collecting documents
At this step, we are waiting for you to provide all the information we need to prepare an accounting report – information about your transactions and documents that support those transactions.
Your input: upload bank statements and supporting documents on app.enty.io.

2. Processing documents
Once we receive the input information, we check whether all transactions are covered (supported by documents) and whether the documents are correct from an accounting standpoint. If everything is clear and correct, we proceed with filing the report.
Your input: be in touch with us and answer our questions.

3. Filing the report correctly,
We prepare the reports and we can file them for you if you provide us with access to your e-MTA and e-Business Register accounts (for annual reports). Also, for annual reports, we need your signature before the submission of the report.
Your input: give us access to your e-MTA account and sign the report (for annual reports).

What should I do to get my report ready?

If you are on the Standard plan, your company only files the annual report. This should happen within six months after the end of the financial year (generally June 30).

To make this happen, we need:

bank statements for the year for all your bank accounts (preferably in CSV/XML and PDF format);
documents that support transactions from the bank statements.

You should provide us with documents beforehand — on the 31st of March at the latest.

If you are on the Pro or E-com plan, along with the annual reports, your company should submit monthly reports (VAT returns). Monthly reports should be filed on the 20th of the month following the taxable month.

To make this happen, we need:

bank statements for the month for all your bank accounts (preferably in CSV/XML and PDF format);
documents that support transactions from the bank statements

You should provide us with documents beforehand – till the 5th of the month following the taxable month.

How do I upload accounting files?

You can always follow our rules to the letter and upload all your documents manually in the accounting section at app.enty.io.

However, we encourage you to try our automated tools and save time on accounting tasks:

1. If you connect your bank account to Enty, we will collect the data about your transactions automatically, and you won’t need to think about generating and uploading your bank statements in the future.

2. Do you receive invoices from your providers by email? Send them to your designated email address, and we will fetch them. You can:

set up this email address as the default email for your providers
create a rule to forward letters from your providers to this email address
simply forward letters from your providers to this email address

Your designated email address looks like this: [email protected] – you can find it in the accounting section at app.enty.io
Don’t forget to sort the documents to send them to the correct accounting period.

3. Use Enty’s iOS App – this way, you can take photos of documents directly from your mobile device and upload them to Enty.

4. Use Enty’s invoicing, contracts, and HR tools – this way, all documents that you create there will be available for accounting purposes.

What documents should I upload?

In most cases, the document that supports a transaction is an invoice. You can tell the invoice from other documents if:

it says invoice (not a receipt, pro forma, payment confirmation, etc.)
it is issued by a company and bears all company details (company registration code, address, and VAT number)
it includes goods or service description, quantity, price and period when service was offered

Here is the list of documents that you might need to upload:

Do all transactions need documents?

No, there are some exceptions to this rule. You do not need to provide any document to support these types of transactions:

transfers between your own bank accounts
bank/payment provider fees and commissions
cashback payments from banks or payment providers
currency conversions
tax payments
payments to Enty

I cannot justify my expenses

If some of your transactions do not have supporting documents (we call this situation “missing documents”), you can:

reimburse these expenses to the company
pay 25% tax on the total amount of the expenses

What happens if I miss the deadline?

If you provide your documents to us after the deadline (the 5th of each month for monthly declarations, the 31th of March for annual reports) we cannot guarantee that the declaration or report will be submitted on time, so you bear the risk of a possible fine (starting from 150 EUR).

How do I pay taxes?

When your declaration is ready, you will receive an email stating the tax amount to pay and the link to make the payment. You can follow the link and pay the tax online.

The link expires 3 days after you receive the email. If this happens, just let us know and we will send you a new link.

How to book a consultation with an accountant?

As an Enty client on the Pro or E-commerce plan, you have a free hour of accounting consultation per month. As an Enty client on Standard plan, you have a free 1-hour accounting consultation per year. Additional consultations will be charged at the cost of €45 per hour.

If you are not on a subscription yet or are using the Lite plan, consultation with an accountant will cost €65 per hour.

To book the consultation, please contact your client manager via chat or email; they will share a link to book a meeting with the accountant. Please share your questions on the booking page; this way, you can ensure that you will get your answers during the call and spend your time wisely.

Also, if you cannot show up on the call, please inform us 24 hours in advance and reschedule it. If you do not show up, your free consultation will be canceled.

How do I switch to Enty?

If another company previously provided services to your business, you must provide us with:

Detailed balance for all accounts up to date
General ledger for all accounts up to date
Fixed assets and depreciation table, if applied

You can simply give us the email address of your provider, and we will get all the documents ourselves.

We will take care of your company's accounting right after you switch to us, starting at the beginning of the next month. If you need us to cover the previous month – you should pay extra.

How do I provide Enty with access to E-MTA?

We have prepared a guide for you here.

VAT

When do I need to register VAT?

If your business's taxable turnover exceeds 40,000 EUR from the beginning of a calendar year, you are required to register for VAT. Once you reach or exceed this threshold, you must apply for VAT registration within three business days. The obligation to register for VAT does not arise if the entire taxable turnover is subject to a zero VAT rate, with the exception of intra-Community turnover of goods and services. If your company participates in OSS/IOSS schemes, it automatically becomes VAT-liable.

You are also obliged to register for VAT or VAT with limited liability in the following cases:

You purchase goods within the EU (excluding excise goods and new vehicles) from a taxable person not registered in Estonia, and the total taxable value of these purchases exceeds 10,000 EUR from the beginning of the calendar year.

Your company purchases services specified in subsection 5 of § 10 of the VAT Act (advertising services; services of consultants, accountants, lawyers, auditors and engineers, translation services, etc.). The obligation to register as a taxable person with limited liability arises from the date of receipt of the service.

We advise checking the following page to get more information on the VAT registration.

So what happens if a company doesn’t register as a VAT payer?

The Estonian government may impose a fine of €1,300 on the company.

How can a company get a VAT number?

Here is a step-by-step guide to getting a VAT number for your company.

Can I cancel the VAT number?

If a company has a VAT number and is dormant, you can cancel the VAT registration; otherwise, you will be obliged to submit nil VAT returns.

How to Apply VAT

Once a company becomes VAT-liable, it is required to apply VAT to invoices. Let’s figure out when you should apply VAT at 22% and when it must be applied at a 0% rate.

All Enty’s subscriptions include an invoicing solution that applies VAT automatically when needed.

I paid VAT on an invoice; can I claim it back?

In Estonia, if you are a VAT-registered business, you can usually claim back the VAT you paid on invoices. This process is commonly referred to as VAT reclamation or VAT recovery. You must be a VAT-registered business to claim VAT back on your business expenses. If you are not registered for VAT, you will not be able to reclaim the VAT.

The general time limit for VAT reclamation is six months from the end of the tax period during which the VAT became chargeable. The time of processing of an application may be extended or result in a negative decision in case the application does not meet criteria set up by the Member State of refund. Please also note that the minimum VAT amount on the application depends on the requirements of each Member State. You can find more information about each Member State requirements here (5. Member States requirements).

Can I claim VAT refund on invoices I paid before registering VAT?

In Estonia, you cannot claim a VAT refund on invoices that were paid before your company was registered for VAT. VAT refunds are typically only available for expenses incurred after the VAT registration date.

Do I need to register for VAT in other countries?

Depending on the nature of your business and the countries in which you are selling your products and services, you should be registered for a VAT number in one or more countries. The requirements change if your company is based within or outside the EU, and they also depend on the selling thresholds for each country. Apart from this, you are required to be VAT registered in all the countries where you are storing goods.

If your business engages in certain cross-border activities, such as supplying goods or services to customers in other EU countries, you might need to register VAT in other EU countries.

OSS/IOSS/EORI

What is OSS?

The "One-Stop Shop" (OSS) is a system that allows businesses to simplify their VAT obligations when selling goods and services to customers in other EU countries. It is a one-stop solution for handling VAT for cross-border sales. If you provide services or sell goods to customers in other EU countries, you can use the OSS special scheme. This simplifies the VAT process, and you can declare and pay VAT through the tax authority of your country (in this case, Estonia) instead of dealing with each EU country separately. If you use the special scheme, you need to submit OSS VAT returns quarterly, and the taxable period is a quarter.

If you are selling goods from an EU warehouse (not located in Estonia), it is essential to promptly register with the One-Stop Shop (OSS) starting from the first euro of transactions. Taxes should be paid in accordance with the value-added tax rate of the customer's country. The OSS can be registered in Estonia, enabling all taxes to be centralized there. In the case of services, the obligation for OSS registration arises when the cumulative sum from all EU countries reaches 10,000 EUR.

What is IOSS?

The European Union introduced the "Import One-Stop Shop" (IOSS) scheme as a unique VAT (Value Added Tax) scheme to streamline and simplify the process of declaring and paying VAT on small consignments imported from non-EU countries. It applies to businesses that sell goods to customers in the EU from outside the EU. By using the IOSS scheme, businesses can declare and pay VAT in one EU Member State (e.g., Estonia) instead of having to handle it separately for each EU country where the goods are imported. This simplifies VAT obligations and makes it more efficient for businesses selling to EU customers from outside the EU. Every month, by the last day of the month, the IOSS VAT return is due.

If you are selling goods from countries outside the EU with a value under 150 EUR (under the Import One-Stop Shop or IOSS scheme), registration under the IOSS becomes necessary.

Do you declare (I)OSS in other countries?

If you have (I)OSS registered under your EE VAT, we submit the declarations in Estonia only. The Estonian tax office takes care of redistributing the VAT to the other member states based on the customer's location.

Do I need to submit any declarations if I have an EORI number?

If your business has an Economic Operator Registration and Identification (EORI) number but does not engage in any trade or operational activities involving the movement of goods across EU borders, you may not be required to submit certain customs declarations related to import or export activities.

When do I need an EORI number?

You need an EORI (Economic Operator Registration and Identification) number when you are involved in international trade and customs activities within the European Union (EU). The EORI number is a unique identification code assigned to businesses and individuals engaged in importing, exporting, or other customs-related transactions.

You will need an EORI number in the following situations:
Importing Goods: If you are importing goods from non-EU countries into any EU member state, you will need an EORI number to clear customs and handle import procedures.
Exporting Goods: If you are exporting goods from any EU member state to non-EU countries, you will need an EORI number for customs clearance and export-related formalities.
Customs Declarations: Whenever you are involved in customs declarations or procedures within the EU, an EORI number is essential.
Customs Warehousing or Special Procedures: If you are engaged in customs warehousing or special customs procedures within the EU, an EORI number is required.

Share capital and company funding

Share capital: when do I need to contribute it? Can I spend it?

The amount of share capital contributed belongs to your company and can be used to pay for business activities; therefore, it cannot be refunded to the shareholders after it is contributed.

If your company was incorporated before February 1, 2023, it is stated in the Articles of Association that the minimum share capital is 2500 EUR. The company is established without making contributions, and the shareholders have 10 years to complete the capital contribution.

NB. If you are considering distributing the dividends, the capital shall be paid up in full prior to the first distribution. You cannot pay dividends from your share capital contribution. You can only pay dividends from the company's revenue once you have paid and registered the share capital.

How can I contribute the share capital?

You can contribute cash or non-monetary contributions to form the share capital. Non-monetary contributions can include any transferable asset or proprietary right with a monetary value. Examples can range from tangible assets like machinery, real estate, or vehicles to intangible assets like patents, copyrights, or licenses. As non-monetary contributions involve specific legal considerations, we recommend consulting with our legal team.

How can I fund my company?

You can start by contributing the initial share capital required to establish the company. If this amount is not sufficient, you can consider increasing the share capital by adding more funds to the company. Another option is to provide a loan from yourself (as the founder) to the company. The duration of the loan can be unlimited, and once your company has sufficient funds in its bank account, the loan can be paid back at any time. While creating an agreement between you and the company for this loan is voluntary, it is recommended to have a formal loan agreement in place. You have the flexibility to set the interest rate for this loan, and it can even be 0%.

Loans and investments

Can I make loans to myself from the company?

According to the Commercial Code, a private limited company may not grant a loan to a shareholder who holds more than 5% of the share capital, and a public limited company may not lend to a shareholder whose share represents more than 1% of the share capital. The same principle of prohibited loans applies to the company’s parent company’s shareholders and other members. It is also prohibited for the company to grant loans to their management board and supervisory board members or procurators.

Can I make loans to other companies or private individuals?

Loans to other companies and private individuals are possible. Making a loan requires you to conclude a loan agreement; you can use a template from contract management to create one. Please note that while concluding an agreement, you shall indicate an interest rate that is not lower than the market rate . Loans that are approved at interest rates below the minimum set by the Finance Minister are regarded as fringe benefits and are subject to social and income taxes.

Kindly note that you should be careful when lending to private individuals. A court decision exists wherein a company incurs a substantial fine for providing loans to individuals without the necessary license. Hence, we strongly recommend delving deeper into this matter. On the flip side, if such loans are infrequently issued, we do not anticipate any problems, as they would not constitute the company's primary activity.

What are the reinvested profits?

Reinvested profits mean any profits that are not distributed (they are either retained in the business or spent on business development). Earnings are not taxed as long as they are reinvested in the company.

Can I invest in X with my Estonian company?

Yes, you can use your Estonian company to invest in various assets such as stocks, real estate, cryptocurrencies, and other investments. Estonia does not have a specific capital gains tax. This means that any gains your company makes from selling these investments would be treated as income, and you would not be subject to capital gains tax unless these are taken out of the company.

Dividends

How do I distribute dividends?

Distributing dividends from your company involves several steps to ensure it is done correctly and in compliance with the relevant laws and regulations. In Estonia, dividends can only be paid from the previous year's profits. It is not allowed to distribute profits from the current year. To distribute dividends, the company's annual report must be submitted to show last year's profit and determine the eligible dividend amount. Additionally, the company's share capital must be fully paid in, and the contribution of the share capital to the e-Business Register must be completed. Moreover, in order to be eligible to distribute dividends, the company must have expenses related to its workforce, such as salaries. The tax office assumes that if a company generates profits for distribution, it has someone working in the company, and that work must be remunerated.

Dividends are distributed based on a resolution of the company's governing body. Taxes on dividends are officially declared, and the tax amount is then paid directly to the tax office. Dividends are typically taxed at a rate of 20/80 (or 25% of the net amount). If profits are regularly withdrawn from the company, a lower income tax rate of 14/86 applies, resulting in a smaller income tax amount compared to collecting profits and distributing them in one lump sum at the termination of the company's activities. When profits are taken out of the company's permanent establishment regularly in a calendar year, the lower tax rate is applied to the extent of the average profit of the three previous calendar years. This average profit must have been taxed with income tax and already taken out.

Double Tax Treaty and dividend distribution

Whether you will be double taxed or not depends on the tax laws and any existing tax treaties between Estonia and your country of tax residency. Estonia has signed comprehensive Avoidance of Double Taxation Agreements (DTAs) with 64 countries (62 are in effect). You may check the list of countries here.

As a resident of a country that has a Double Taxation Treaty (DTT) with Estonia, you may be eligible for reduced tax rates on dividends distributed from an Estonian company. To ensure that you can benefit from any reduced tax rates on dividends, you should consult with a tax advisor or competent authority in your country to understand the specific provisions of the DTT and how they apply to your situation.

Salaries

Is it possible to pay myself as a contractor?

Well, this is possible. However, according to the Estonian Tax Office's opinion, paying salaries to contractors who do not provide evidence of paying taxes in their country of residence may be considered risky. As a result, the tax office has the right to request proof of tax compliance in the contractor's foreign country of residence. This proof may include a certificate from a foreign tax authority or a statement of a payment account. If you choose to pay taxes outside Estonia (even though you have the option to pay them in Estonia), the tax office may inquire about where you pay your taxes and whether they have been paid at all.

How do I hire someone for the company?

There are three hiring options available: independent contractor, employee, and board member. For each option, a specific agreement shall be concluded: a service agreement with an independent contractor, an employment agreement with an employee, and a board member agreement with a board member.

Every payment made to someone you hire under a service agreement must be accompanied by either an acceptance act (if the other party is a private individual) or an invoice (if the other party is a registered business entity or individual entrepreneur).

If you employ a resident, you will need to conclude an employment agreement indicating the terms of payouts. Once both parties have signed the contract, our accountant will enter information about your employee into the Estonian employment register and we will create monthly payslips for you to complete the salary payment. Residents may apply a non-taxable minimum (up to 654 EUR/month).

If you employ a non-resident, you will need to follow these steps:

If a person works for an Estonian company, they should speak with their local tax office (or a tax advisor) and request written guidance on how to pay taxes.
Check if your company needs to get registered as a taxpayer in the country. If it does, you will need to manage payroll locally. If not, you will need to transfer the required amount of taxes to be paid along with the salary.

I want to employ a foreigner; what do I need to do?

Since we do not support payroll management outside Estonia, if you employ a non-resident, you will need to follow these steps:

If a person works for an Estonian company, they should speak with their local tax office (or a tax advisor) and request written guidance on how to pay taxes.
Check if your company needs to get registered as a taxpayer in the country. If it does, you will need to manage payroll locally. If not, you will need to transfer the required amount of taxes to be paid along with the salary.

Is there any minimum wage in Estonia?

Yes, the current minimum wage in Estonia will be 725 EUR per month in 2023, when the salary is paid on the basis of an employment agreement. There is no minimum wage for people working under service or board member agreements.