Entrepreneur Account for natural person

What shapes of business do we have in Estonia?

The most popular types are FIE self-employed individual and a company OÜ, rarely for bigger companies AS.

This one is quite new shape of small business called Entrepreneur Account for natural person.

Simple good idea to open an LHV Entrepreneur Account, and bank together with Tax Department will automatically deduct 20% of income tax from your pure incomes. Sounds good, no accounting, no taxes to declare, less headache and work to do, but there’s always “but”.

Minuses:

1. The minus I see here, that your clients - companies in Estonia, don’t want to pay extra 25% (20/80) income tax, because if you are not registered in the business register and if you have only LHV Entrepreneur Account, they have to pay extra tax for you as well. Double income tax here. You will pay, and your company client will also pay.

2. Your clients could get a risk to break the tax law. There’s no available information in public to check LHV Entrepreneur Account, only in the Business Register to find your official registration is missing. This is only your responsibility to inform your client in Estonia, that you are this new type of business, and you need to explain that they have obligation to pay for you extra income tax.

3. You don’t have rights issue invoices to your clients.

4. You don’t have rights to exclude and deduct your expenses, you pay only 20% fixed income tax, that’s all.

https://www.emta.ee/eng/private-client/declaration-income/entrepreneur-account-natural-person