Showing posts with label TAX. Show all posts
Showing posts with label TAX. Show all posts

Monday, November 10, 2025

Board Member Fees vs Employment income?

 ðŸ’¡ E-residents and taxes — what’s the smarter way to get paid?













If you run your business through Estonia’s e-Residency program, you’ve probably wondered about the difference between board member fees and employment income. In our latest episode, we break down both options, explore their tax implications, and share insights to help you choose the most efficient setup for your situation.

🎧 Listen now: Podcast Tax Talk

#eresidency #estonianbusiness #taxes #entrepreneurship #remotebusiness #taxplanning #founders #startup #finance #podcast

Wednesday, February 12, 2025

Estonia’s New Dividend Tax Rules in 2025








What Businesses and Investors Need to Know 


As of January 1, 2025, Estonia has introduced significant changes to dividend taxation. If you’re a business owner or investor, here’s what you need to know about the new rules.  


1. A Unified Tax Rate of 22%

Going forward, all dividends are subject to a flat income tax rate of 22%. This tax is calculated as 22/78 of the net dividend paid out. For example, if a company distributes €10,000 in dividends, the corporate tax will be:  

€10,000 × 22/78 = €2,820.51  

This means that to distribute €10,000 net, the company must first earn approximately €12,820 in profits before taxes.  


2. No More Lower Tax Rates

Previously, companies could benefit from a reduced 14% tax rate on regularly paid dividends. However, this preferential tax rate has been abolished. From 2025 onwards, all dividends—whether regular or occasional—are taxed at the same 22% rate.  


3. No Additional Tax for Individual Shareholders 

Here’s some good news for individual investors!  

Until now, Estonian companies that paid out dividends at the 14% rate had to withhold an additional 7% tax for individual shareholders. This extra tax no longer applies. Now, all dividend taxes are settled at the corporate level, so individuals receive their dividends tax-free in Estonia.  


What This Means for You 

✅ Businesses no longer have to deal with different tax rates for regular and irregular dividends.  

✅ Investors benefit from a simpler system with no extra personal tax on dividends.  

✅ Corporate tax obligations remain competitive compared to other European countries.  



Wednesday, November 6, 2024

Upcoming Changes for Small Businesses in the EU: VAT Reform and Practical Examples

 



Upcoming Changes for Small Businesses in the EU: VAT Reform and Practical Examples

Starting from 2025, significant changes to the Value Added Tax Act (VAT) and Taxation Act will take effect in Estonia and across the European Union, aimed at simplifying cross-border operations for small businesses. These amendments are designed to reduce administrative burden and provide small businesses with easier access to foreign markets without incurring excessive tax obligations. Below is a brief overview of the updates and two practical examples to clarify how the small business scheme might work. Please note, however, that this legislation is still under review and has not yet been finalized.

Key Changes

  1. Reduced Administrative Burden: Small businesses operating in other member states will not need to register for VAT until their turnover in that specific country exceeds local VAT thresholds, provided their total EU-wide turnover is under €100,000. This change significantly reduces the need for separate registrations and reporting requirements in every country where they do business.

  2. New Rules on Real Estate and Fixed Assets: For example, new real estate sold within one year of first use must be subject to VAT. For fixed assets, the input VAT calculation will need to align with actual usage rather than initial projections.

Example 1: Small Business Turnover Below €100,000

Consider Mari, who owns a small business in Estonia selling handmade goods. Her company’s annual turnover in Estonia is €30,000, and she also sells products in Finland and Latvia, with annual turnovers of €8,000 and €5,000, respectively. Her total turnover within the EU is therefore €43,000, which is below the small business threshold of €100,000.

With the new rules, Mari can apply the small business scheme as follows:

  • Simplified Registration and Reporting: Mari does not need to register for VAT or submit separate VAT reports in Finland and Latvia, as her turnover in these countries is below their local VAT thresholds.
  • Declaration Submission in Estonia: Mari can declare her total turnover, including sales to Finland and Latvia, in a single VAT declaration submitted to the Estonian Tax and Customs Board. This reduces her administrative burden and allows her to focus on her core business.

Example 2: Small Business Turnover Above €100,000

Now, consider Jüri, who owns a small Estonian business selling electronics. His annual turnover in Estonia is €50,000, and he also sells products in Finland and Sweden, with turnovers of €30,000 and €25,000, respectively. His total EU turnover is therefore €105,000, exceeding the small business scheme threshold of €100,000.

Since Jüri’s total turnover surpasses the threshold, he cannot use the small business scheme and will need to follow these requirements:

  • VAT Registration in Each Member State: Jüri will need to register as a VAT payer in any member state where his turnover exceeds the local VAT thresholds, such as in Finland and Sweden.
  • Meeting Tax Obligations by Country: Jüri will need to declare and pay VAT according to the tax laws in Finland and Sweden, as his turnover in each country has exceeded local thresholds. In addition, he must continue declaring his Estonian turnover to the Estonian Tax and Customs Board.

Summary

These updates in VAT legislation are aimed at helping small businesses operate more easily and cost-effectively across EU borders. For businesses whose turnover remains below €100,000, the small business scheme provides a way to reduce the administrative load and associated tax costs. However, for businesses with turnover above this threshold, additional tax obligations arise for each country in which they operate.

These reforms provide significant benefits, particularly for small businesses that previously had to register and report VAT across multiple countries even at lower turnover levels. It is important to remember that the proposed changes are still under review and subject to final approval before they are set to take effect.

Tuesday, October 15, 2024

What is the New Motor Vehicle TAX or Car TAX in Estonia?

 



Understanding the New Motor Vehicle Tax Act:         

What You Need to Know


As of January 1, 2025, the Motor Vehicle Tax Act will come into effect, bringing significant changes for all motor vehicle owners. This new legislation introduces the motor vehicle tax, a national tax that applies to every registered vehicle in the traffic register, and it outlines the vehicle registration fee as well. Here’s a comprehensive overview of what this means for you.


What Is Motor Vehicle Tax?

The motor vehicle tax, often referred to as car tax, is an annual payment required from all vehicle owners or responsible users. The Tax and Customs Board will manage this tax, ensuring compliance and collection.


Key Details:

  • Payment Schedule: The tax is paid annually for the calendar year.
  • Responsibility: Either the owner or the responsible user of the vehicle is liable for payment.
  • Tax Calculation: Each vehicle has an individual tax amount determined by several factors, including:
    • Base part
    • CO₂ emissions
    • Gross weight of the vehicle

Vehicle Registration Fee

In addition to the motor vehicle tax, a registration fee is applicable when a vehicle is registered for the first time. This fee is also managed by the Transport Board and varies by vehicle category.


Important Dates and Deadlines

To help you stay on track, here are the key dates for tax notices and payments in 2025:

Vehicle Registration Period

Tax Notice Issued

Payment Due

Registered as of January 1

By February 15

June15 and December 15

Registered between 

February 1 - September 30

Within 15 working days                 

 after registration

December 15

Registered between 

October 1 - December 31

Within 15 working days 

after registration

June 15, 2026

Stay Informed emta.ee


Calculate your car tax here ðŸ‘‰ tax calculator