Page 19 - Mazars Central and Eastern European tax guide 2023

Estonia The standard 20% rate applies to the supply of all goods 4) The supply of goods or services specified in the Estonian
and services not qualifying for the reduced rate of 9% VAT Act providing the taxable person has opted for
or exemption. A reduced rate applies to accommodation, taxation thereof.
books, certain periodicals, listed pharmaceutical products Certain forms of supply are subject to a 0% rate
and medical devices. The VAT rate on the export of goods,
Klaar.me Services OÜ and the intra-Community supply of goods and certain (i.e., exemption with credit or zero-rating), including,
but not limited to:
Pille 9/3-53, 10138 Tallinn, services is 0% (i.e., exemption with credit).
Estonia VAT and all other taxes are administered by the Estonian 1) The export of goods;
Phone: +372 5883 6369 Tax and Customs Board (www.emta.ee). The following 2) Intra-Community supply of goods;
www.klaar.me/en 3) The products listed in Annex V of the VAT Directive,
transactions are subject to Estonian VAT:
which can be placed into a licensed VAT warehouse;
VAT options Applicable / limits 4) Supply of services which are not deemed to be supplied
in Estonia.
in Estonia Other indirect tax types in Estonia include excise duty, and
From 1 July, 2021 OSS system the environmental protection charge.
Distance selling
Corporate taxes and other direct taxes gross amount) of the distributed profit. A reduced rate is applicable. Personal income tax / Social security system
of 14/86 of the net amount (14% of the gross amount) Call-off stock ü
In general, branches are taxed in the same way applies to regular dividend distributions (i.e., distributions Estonia has a proportional (i.e., flat) tax rate of 20% which
as subsidiaries: reinvested and retained profits are that do not exceed the amount of the average taxable VAT group registration ü applies to all items of income derived by any resident
exempt from corporate income tax; distributed profits dividend distributed over the preceding three years, Cash accounting – yearly taxpayer. The gross income of resident individuals includes
are subject to corporate income tax. All undistributed calculated at the level of the payee). If a company amount in EUR (approx.) No, only self-employed person. their worldwide income from all sources, irrespective of the
corporate profits are tax-exempt. This exemption covers capitalises the development-related expenditure Import VAT deferment ü origin of the income.
both active (e.g., trading) and passive types of income as intangible assets and the development expenditure has
(e.g., dividends, interest, royalties), as well as capital gains not completely depreciated, profit cannot be distributed Local reverse charge ü Taxable income includes both active income such
from sales of all types of assets, including shares, securities unless the sum of the reserves that can be used for the Option for taxation as employment and business income, as well as passive
and immovable property. This tax regime is available distribution of profit and the retained profit from previous No, but in some cases yes. income. The overall basic exemption applied on all types
to Estonian companies and permanently established periods at least equals the undepreciated development letting of real estate of income is up to 6000 euros per year, i.e., up to 500
foreign companies that are registered in Estonia. expenditure. supply of used real estate No, but in some cases yes. euros per month.
Corporate profits are not taxed until the profits are The following payments are subject to withholding tax: VAT registration The Estonian social tax of 33% (comprising 20% social
distributed as dividends, share buy-backs, capital 1) 7% withholding tax applies to dividend payments threshold > EUR 40,000 security contributions and 13% health insurance
reductions, liquidation proceeds or classified as profit made to resident or non-resident individuals (applies contributions) must be paid by employers in addition
distributions, such as transfer pricing adjustments, to dividends taxed at a lower tax rate). 1) The supply of goods and provision of services with to the gross salary. Currently, employees are not
expenses and payments that do not have a business 2) Royalties (including payments for the use of industrial, a place of supply in Estonia; required to make any personal social tax contributions.
purpose, fringe benefits, gifts, donations and business commercial, or scientific equipment) paid to non- 2) The import of goods into Estonia; The Estonian pension system is based on three pillars.
entertainment expenses. Rate: Corporate income tax residents are generally subject to 10% withholding tax
is levied at a rate of 20/80 of the net amount (20% of the 3) intra-Community acquisition of goods in Estonia;
under domestic law, but reduced rates or exemptions
may apply under double tax treaties.
Transfer pricing in Estonia 3) Rental payments to non-residents for the use Wage related taxes in Estonia Minimum wage Average wage
Arm's length principle ü Since 2007 of immovable property located in Estonia and movable in private sector
property subject to registration in Estonia. in EUR in EUR
4) Interest, royalties and rental payments to resident
Documentation liability ü Since 2007 individuals. 725 1,685
5) Payments to non-resident companies for services Total wage cost 970 133.80% 2,255 133.80%
APA ü Since 2008 provided in Estonia. Vocational training contribution - - - -
Country-by-Country Since 2016 6) Salaries, directors’ fees and service fees paid Social Contribution tax 239 33.00% 556 33.00%
liability ü to individuals.
7) Payments for the activities of non-resident artists Health Insurance Contribution 6 0.80% 13 0.80%
Master file-local file or athletes carried out in Estonia are subject to 10% Gross salary 725 100.00% 1,685 100.00%
(OECD BEPS 13) ü Since 2019 withholding tax .8) Certain pensions, insurance benefits,
applicable Personal income tax* 9 20.00% 265 20.00%
scholarships, prizes, lottery winnings, alimony, etc. paid Employees' Social contributions (inc. Funded pension II pillar) 15 1.49% 34 1.49%
to non-residents and resident individuals.
Penalty Employees' Health contributions 12 1.20% 27 1.20%
lack of documentation VAT and other indirect taxes Net salary 690 95.16% 1,360 80.70%
20/80 tax on gross value
tax shortage ü of underpayment VAT applies to the supply of goods and services performed * Salary 0-14,000 ALL PIT rate 0%.
* Salary 14,001 ALL PIT rate 20% of the amount.
+ late payment interest by a taxable person in the course of their business activities * Salary over 150,001 ALL PIT 15,600 ALL + 23% of the amount over 150,000 ALL.
in Estonia.
Related parties > 50%
A taxable person is one who is engaged in business, Liis Laanesaar
Safe harbours No that is, independent economic activity in the course CEO/sworn auditor
of which goods or services are supplied, and is registered Phone: +372 5883 6369
Level of attention paid by Tax or required to register for VAT. E-mail: liis@klaar.me
Authority 9/10

18 Mazars Central and Eastern European tax guide 2023 Central and Eastern European tax guide 2023 Mazars 19