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Where do e-residents pay taxes?

E-residents taxes

The Estonian e-residency scheme is one of the most successful programs launched by a government in the world. Thanks to its competitive tax regime (currently the best in the world, according to OECD) and the smooth bureaucracy, Estonia attracted a lot of people with innovative business ideas from any corner in the world.

Many businesses were founded and flourished since then, and Estonia already recovered all the costs of the e-residency scheme in taxes.

That being said, entrepreneurs who find out about the Estonian e-residency for the first time tend to have a lot of doubts about how the taxation system works. One question in particular arises above all the others: where do I pay taxes? Am I subject to dual taxation?

Hopefully, you’ll have a clear idea after you read this post.

Let’s make a distinction

Business owners, especially when they lead a one-person business, tend to think that their personal taxes have a close relation with corporate taxes, but this is not always the case.

The peculiarity of e-residency is that you can run a company in Estonia even if you live abroad or have no fixed address (think: digital nomads), but this is what makes all the doubts arise.

Let’s see where to pay personal taxes and corporate taxes.

E-residents’ personal taxes

Personal taxes must be paid in your country of residency. If you are an e-resident, you likely live in another country.

If that’s the case, the best practice would be to get in touch with an accountant and explain your situation.

Think about it: your personal taxes fund public services like healthcare, education, pensions, public administration and many other things that you might need in your daily life. It wouldn’t make much sense to pay this kind of taxes to a country you may have never been.

It’s true that in rare cases you might end up paying taxes in both countries, but there’s very little chance, as most coutries abide by the regulations established by international treaties. In most cases you have a home country, whether you live there or not, to which you owe tax money, even if you’re a digital nomad.

Again, as a rule of thumb, taxes are paid to your home country and are calculated based on your income, no matter where it comes from.

Let’s see an example.

Mario lives in Italy, but he is the CEO of an Estonian company he was able to open thanks to his e-resident status. Mario will pay himself a wage, from which taxes will be deducted by the Italian tax office according to Italian laws and rates.

Obviously, Mario won’t have to pay any tax in Estonia, except for corporation tax.

E-residents’ corporation tax

Your Estonian company’s taxes must be paid in Estonia. You can do that online in a few minutes (that’s another perk of managing business in Estonia), but the system still does have its dark folds: depending on what’s your business about and with whom you trade, you might pay taxes in different ways. That’s why many e-resident entrepreneurs contact us at first: to make sure they’re paying taxes the right way.

Getting back to our example, Mario’s company has a registered address in Estonia. At the end of every year he’ll have to pay corporation tax in Estonia according to Estonian laws and rates, no matter where he lives.

That’s pretty much all about where e-residents pay taxes. If you have any doubt, send us your enquiry.

About the author, Estonian Crypto Licenses

He’s the founder and managing director of FinTech Legal Center, which provides pan-European legal, compliance, accounting, Hr and strategy advice to Fintech businesses. His customers say he can make extremely complicated details easy for business people to understand and digest. Further, according to them, he’s the calm in the storm.

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About Estonian Crypto Licenses

Estonian Crypto Licenses is a trading name of TechIuris OÜ, a company based in Tallinn, Estonia and specialised in legal and compliance solutions for European FinTech companies. We are a fully licensed company, and EVEA and e-Residency marketplace members. Here on our blog, we share the latest news on topics such as NFTs, cryptocurrencies, blockchain and much more.

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