Accounting, Payroll, Tax & Legal since 1989

Taxation in Estonia

Leinonen Lithuania offers full tax consulting assistance: advisory on value added tax, payroll taxes, corporate income tax and other related matters.

Our Tax team has extensive professional experience in tax advisory business.

Leinonen Lithuania will make sure that the taxation is performed according to the tax regulation requirement. We offer a broad shoulder to lean on in the overly complicated tax jungle.

Our main areas of specialization are:

Registration for VAT purposes

Leinonen can assist with VAT registration in Lithuania. We have experience and practical knowledge of registering companies operating in various sectors. A company is required to register for VAT purposes if:

  1. distance selling transaction exceeded/plan to exceed threshold indicated in legislation (LT - EUR 35.000);
  • performs transaction related to real estate located in Lithuania;
  • performs other transactions which may require VAT registration, i.e. transfer of own goods, intra - acquisition or supply of goods, etc.

VAT and Intrastat compliance procedure

Leinonen Lithuania ensures VAT and Intrastat reporting compliance. Furthermore, our team makes sure that the data provided by our clients is submitted to relevant authorities in a correct and timely matter. Afterwards, we provide copies of submitted documents in accordance with payment details if needed. Leinonen Lithuania assists companies to minimize time costs while dealing with VAT and Intrastat compliance procedures.

Tax review procedure 

Leinonen Lithuania's team offers tax review to companies seeking to find out if their activities comply with the legislation. Tax reviews can be focused on single (e.g. VAT, Corporate income tax (CIT)) or several taxes based on client's needs and requirements.

CIT Compliance 

Leinonen supports clients with CIT compliance services. CIT calculation requires extensive knowledge of the local legislation and may be a time-consuming task. Therefore, based on data provided by client, Leinonen Lithuania can prepare CIT or other related returns and submit them to the Tax Authority.

Registration for payroll purposes

It is required to register for payroll purposes if a foreign company's employees are employed in Lithuania. Leinonen can assists with evaluation of the current situation and identify what obligations the company holds in terms of payroll registration.

Assessment of obligation for permanent establishments

A company that operates in Lithuania can create a permanent establishment (PE) in the country. Leinonen can assist and support with documentation and processes related to the procedure. Furthermore, if during an evaluation of a company it is identified that that PE has been created, Leinonen can assist with registration with Tax Authorities.

Carrying out Tax recovery procedures

If a company has identified an overpayment of taxes, Leinonen Lithuania is able to assist and provide a solution on tax recovery procedure.

Tax saving projects

Leinonen Lithuania is able to evaluate the possibility to use tax incentives establish by tax legislation. If tax incentives can be paid to a client, Leinonen can also assist with the collection and preparation of supporting documents required by the Tax Authorities.

Preparation of rulings

Leinonen's team is able to support companies in terms of ruling preparation to Tax Authorities based on provided information. We are able to assist our clients when an official explanation is needed from Tax Authorities in terms of a specific situation.

Support with Tax Investigation and other communication with Tax Authorities

Leinonen Lithuania provides full assistance in the matter of Tax investigation from Tax Authorities. We can review the required documentation and advice on what actions should be taken or if amendments should be made.

Tax Policies and other internal documentation

Leinonen Lithuania is able to support clients to prepare tax policies and other internal documentation according to company's activities. This documentation can improve company's internal processes by minimizing time spent on educating new employees about internal structures.

FAQ

Yes and no. Estonia has a deferred corporate tax system, which means that all undistributed corporate profits are tax-exempt. However, if the profit is distributed then the corporate income tax (“CIT”) rate is 20%, calculated as 20/80 from taxable net payment.

CIT is assessed on a monthly basis and only when the profits have been distributed. Such profits would be dividends, share buy-back, capital reductions, liquidation proceeds, including transactions that are considered as deemed profit distributions (e.g. transfer pricing adjustments, expenses and payments that do not have a business purpose, fringe benefits, gifts, donations and business entertainment expenses).

Dividend distribution is subject to income tax at the rate of 20/80 of net dividends (20% of gross disbursement). For companies making regular profit distributions (dividends) a reduced rate of 14/86 of net dividends (14% of gross dividends) is applicable. If the natural person receives reduced rate (14%) dividends then the 7% withholding income tax applies, unless a tax treaty provides for a lower WHT rate (5% or 0%).

Dividends distributed by Estonian companies are exempt from corporate income tax if the dividends are paid from:

  • the European Union (“EU)”, European Economic Area (“EEA”) and Swiss tax resident companies in which the Estonian company has at least a 10% shareholding;
  • profits derived through a PE in the EU, EEA or Switzerland;

Please note, in order to use the exemption method on dividends, received dividends/profits from abroad should be declared correctly on tax form TSD. Otherwise it is not possible to use the exemption method on dividend distribution.

Based on the Estonian Value-Added Tax Act a company is obligated to register itself as a VAT liable person. That is, if the taxable supply of the transactions carried out by the company exceed 40 000 euros, as calculated from the beginning of the calendar year. The threshold for distance sales is 35 000 euros. An obligation to register as a taxable person arises the latest on the date on which the supply reaches the aforementioned thresholds.

It is possible to register yourself on a voluntary basis as a VAT liable person. To register as a VAT payer you are required to submit an application to the Estonian Tax and Customs Board. The prerequisite for the registration is that the company is already engaged in business or is about to commence business in Estonia.

If the provided evidence (regarding the company’s business or start of business) is insufficient, the Tax Authority has the right to request additional proof. Leinonen Estonia helps a company register itself as a VAT liable person and also communicate with the Estonian Tax Authorities.

We provide VAT compliance services in Estonia, i.e. preparation and submission of tax returns and related reports, as well as statistical reports. Moreover, we provide a fiscal representation service with a special license no ME 003-2018 (serving the clients from third country). In addition to compliance work we provide VAT consultations.

On the one hand, submitting the personal income tax declaration is not complicated in Estonia. No need to submit a declaration on paper. Estonian residents already have prefilled electronic declarations in the e-Tax system. However, you might need our assistance to add information to the prefilled declaration, such as income received from a foreign country and expenses (tax incentives) paid in a foreign country, which can be deducted from taxable income, and data on the transfer of other property.

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