Estonia - Tax Guide for Freelance Contractors

Tax residents in Estonia:          are liable to pay Estonian tax on their worldwide income,
Non tax residents in Estonia:   are liable to pay tax on Estonian-source income only.

Individuals will be regarded as tax residents:

• if they have a permanent place of residence in Estonia, or
• if they remain in Estonia for 183 days or more during a 12-month period.

Married persons may file a joint tax return:

• if both spouses are resident in Estonia,
• if one spouse is resident in Estonia and the other in another EU member state and has received at least 75% of his taxable income from   Estonian sources, or
• if both spouses are resident in another EU member state and at least 75% of their aggregate income comes from Estonia.

Taxable income includes:

• employment income,
• business income,
• gains from the transfer of property,
• rent and royalties,
• dividends and interests.

Certain deductions and allowances are permissible for 2009 including:
 

• fringe benefits (taxable at the employer’s level),
• per diem and accommodation reimbursements for business trips (up to prescribed amounts),
• compensation for the use of private vehicles,
• donations to registered non-profit organizations,
• admission and membership fees (not exceeding 2% of the taxable income) paid to trade unions, the two together may not exceed 5% of the taxpayer’s income after deduction of other allowable expenses,
• interest payments for loans for the acquisition or reconstruction of a house or apartment,
• personal educational expenses for dependents under 26 years,
• alimony and maintenance payments are fully deductible,
• premiums paid to qualifying pension schemes and funds are deductible up to 15% of the individual’s income,
• a personal allowance of EEK 27’000 (EUR 1726) and an additional allowance of the same amount per child under 18 years old.

The total deductions for donations, trade union fees, mortgage payments and educational expenses may not exceed EEK 50’000 or 50% of the taxable income, whichever is lower.

Benefits in kind like accommodation, company car, lunch vouchers or similar items are usually not considered taxable income for the employee, but are taxable for the employer.

Income tax rates for 2009:

• 21.00% flat tax rate.

The employer deducts tax at source from the gross salary.

Filing date:

An individual whose only income is a salary from one employer and for whom tax at source has been withheld, is not obliged to file a tax return.

Others have to file a return by March 31st, following the tax year.