Wondering where e-residents pay corporate taxes? Or how to take advantage of Estonia’s competitive tax system? Both will depend on different tax laws, treaties and how your business activities are structured.
Running a business across borders involves navigating the world of cross-border taxes. E-resident company owners need to refer to:
Each category has general rules of thumb to help figure out where they should be declared.
Your Estonian company will automatically be considered a tax resident of Estonia when it is registered. However, your company can also be considered a tax resident or create a Permanent Establishment in another country, thus have tax liabilities there.
E-Residency does not exempt companies from dual tax residency or foreign tax liabilities. To avoid double taxation Estonia has signed treaties with 60+ countries.
You really don’t need to figure out all the nuances of cross-border taxation yourself. You will find 50+ tax experts from around the world in the Marketplace. They have experience helping e-resident founders understand their companies' tax obligations.
E-residents can boost their business presence in Estonia to legally pay corporate taxes here. For example:
Thomas is a digital nomad. He became an e-resident and founded an Estonian company.
Thomas can manage his company entirely digitally from anywhere in the world, which is very cost-efficient and easy. Since he works in different countries and is not a permanent resident anywhere, he does not need to register a Permanent Establishment.
Tina is an e-resident and lives in Frankfurt. She is working as a copywriter and founded an Estonian company since it is effortless, fast, and cost-efficient.
However, since she works from Germany, she needs to register a Permanent Establishment in Germany and profits from business activities would be taxable in Germany. The treaty between Estonia and Germany will ensure that dividends distributed in Estonia will be exempt in full from income tax here.
Yolanda is self-employed and lives in Valencia. She is a consultant. Her clients are in Spain, Portugal, and the UK. She is an e-resident of Estonia and has opened an Estonian OÜ. As she has clients in Spain and abroad, she will have part of her activities localized in Spain.
For her international clients, she uses her Estonian company, the OÜ, with which she invoices directly and has employees and premises in Estonia. Therefore, if she does not distribute dividends from her Estonian company, she will not have to pay any corporate tax. She will declare on her IRPF any income received from her Estonian OÜ.
Javier is an Argentinian living in Barcelona and the founder of a startup, which sells products all over the world.
Javier is an e-resident and has his OÜ in Estonia, where he also has an office and employees. His company pays dividends to him and his co-founder. In Spain, as a tax resident, he will have to register as a self-employed person (autonomo) and declare, as a partner of a foreign company, the dividends distributed by his company in Estonia.