How can an Umbrella Company Help with Contracting in Estonia?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Estonia. Even better, most are experts in Estonian and expat tax law, meaning they’ll also help you optimise your earnings in Estonia.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Estonia.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Estonia, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Estonia and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Estonia
One of the most consistently challenging aspects of contracting in Estonia is complying with the country’s tax system. As well as paying tax in Estonia, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Estonia
If you’re working in Estonia under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Estonia for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Estonia, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Estonia through PAYE is left with the prospect doing everything themselves.
Do you know much about Estonian Tax Law? Does Estonia have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Estonia can range from 0 to 20 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Estonia
| When Do You Need to Lodge Your Tax Return? | 31 March (in the year following the income tax year) |
| Tax Filing Deadline | 31 March (in the year following the income tax year) |
| Can you file it online? | Yes, https://www.emta.ee/ |
How to File Taxes in Estonia as a Contractor
You are required to submit an income tax return if your annual income exceeds the tax exemption threshold, and you are required to pay additional income tax or you would like to claim any tax deductions.
Step 1: Review Pre-Filled Data
From 7 to 9 February, taxpayers can review pre-filled income tax returns, based on data which has been submitted to the Estonian Tax and Customs Board by employers.
In the case of any missing or incorrect data, you are required to contact your employer so the data to be amended.
Step 2: Declare Income
There are 3 ways to declare your income: (i) online, (ii) at a service bureau or (iii) by post.
(i) Online
Log in to e-Tax Board/e-Customs here(link is external) with your ID card, mobile ID, or via Internet bank.
Fill in the required fields in Estonian. Information on the status of the income tax return, appears on your personal income tax information page. If a tax declaration needs further verification, a notice will appear on the information page.
(ii) Service bureau
From 15 February, you may collect a pre-filled income tax return from your nearest service bureau, which can be found here(link is external).
Ensure the information is accurate and complete, making amendments as required. If you have received income that is not included on the pre-filled tax return, you must declare this income as well.
Alternatively, you may complete and a blank tax return form available here(link is external) or use a computer at the service bureau. A service bureau official is able to provide assistance, if required.
(iii) By post
Income tax returns can be delivered to the Estonian Tax and Customs Board by post. Addresses can be found here(link is external).
Tax Figures in Estonia
| Currency | Euro (EUR) | ||||||
| Tax-free Threshold in Estonia | EUR2,160 | ||||||
| Income Tax Rates |
|
||||||
|---|---|---|---|---|---|---|---|
| Notes |
|
Tax Residency in Estonia
When do you become a tax resident in Estonia
You become a tax resident in Estonia when:
- Your place of residence is in Estonia;
- You stay in Estonia for at least 183 days over 12 consecutive calendar months; or
- You are an Estonian state public servant in the foreign service.
A person is deemed to be a resident from the date of their arrival in Estonia.
Does the 183 day rule apply in Estonia
Yes
Am I taxed on my global income in Estonia
Residents are taxed on their worldwide income. Non-residents are taxed on their Estonia-source income only.
Can you set up your own Limited Company in Estonia?
| How long does it take to set up | 3.5 days |
| How much does it cost | EUR145 - EUR190 |
| Is it easy? | Starting a Business Rank: 12/190 (Source: World Bank) |
Tax Calculator in Estonia
If you are a contractor and want a calculation on your tax and net retention in Estonia, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Estonia
Contractors in Estonia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. An Estonian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Estonian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Estonian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Estonia
We work with numerous umbrella companies in Estonia, many of whom are experts in tax and immigration laws. If you have any questions about tax in Estonia, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Estonian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Estonia but without the overhead of directly dealing with the Estonian tax authorities. Get in touch with us today for some reliable advice on tax in Estonia!
A Contractor’s Guide to Work Permits in Estonia
Immigration is one of the primary concerns for any contractor hoping to start working in Estonia. Permanent employees will find it easy to get their Estonian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Estonian work permit, known more commonly as the long-stay (D) visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Estonia is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Estonia (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Estonia. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Estonia and match contractors with the right company for them. If you’ve already secured a contract in Estonia, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
