Tag: Estonia

Digital nomads is a term one encounters with increasing frequency. According to the simplest definition, it is a person who combines travel and work through the use of new technologies in the broadest sense. They can work from anywhere on the globe as long as they have access to the Internet. It is estimated that by 2035 there will be more than one billion such people worldwide!

Estonia as the digital heart of Europe

Estonia is actively trying to work on its image as the digital heart of Europe. It is a country that understands the modern following of the absence of physical boundaries and limitations and the necessity of global operation of businesses of the future. Hence, it was one of the first countries in the world to introduce a special type of visa dedicated to people who work in one country and want to physically stay in Estonia specifically. This program began in August 2020 and is being successfully continued.

Visa for digital nomads in Estonia

The idea behind the digital nomad visa is to allow entrepreneurs, employees and freelancers to provide work from the territory of Estonia without having an actual residence there. This is particularly innovative and suited to the realities of a changing world and all the more useful in the era of the COVID-19 pandemic.

How to apply for a digital nomad visa in Estonia? 

What does it look like in practice to apply for this type of visa? Digital nomads are subject to general requirements similar to those of applicants for other types of visas. This means that in order to be granted one needs to verify one’s identity and provide information on one’s intended stay. Basic criteria must also be met: work using modern technologies (in other words, it is necessary to prove being a digital nomad), be an employee of a foreign entity (or a partner in a company registered outside Estonia, or be a freelancer providing services to entities outside Estonia documented by an appropriate contract), and it is necessary to prove receipt of relevant income.

The visa program itself will be gradually expanded and can be combined with other Estonian programs such as obtaining e-residency in one application.

For what period is the visa issued?

The Estonian digital nomad visa is issued for one year and cannot be extended. It is possible to apply for a second visa of this type, but it is only issued for an additional six months. Its main advantage is the possibility to stay on Estonian territory and it can become an excellent starting point for getting to know the Estonian lifestyle and local culture. Family members of the holder can also apply for such a visa.

The described type of visa is another big step Estonia is taking towards work done remotely and independently of location. The adopted regulations are perfectly in line with global trends, daring to say that they even dictate them. Indeed, Estonia’s footsteps are being followed by other jurisdictions that see considerable potential in this modern form of travel.

More and more Polish entrepreneurs are looking for new solutions for their business abroad. This is especially true for those entrepreneurs who operate internationally. In search of optimization, they are setting up new companies in countries that have a business-friendly approach, such as Estonia.

As more and more people look to register car fleets abroad, including passenger cars, more companies are being established there. While it may not be financially attractive to set up a company overseas just to obtain a passenger car, setting up a company to run a business is already a viable option. Entrepreneurs are increasingly choosing Estonia, which has an attractive tax system and a developed e-government system. It should be noted that Estonia, has a signed double taxation treaty with Poland.

Below you will find everything you need to know about registering a car in Estonia and what documents you need to provide when registering at the office.

How to register a car in Estonia?

There are different ways to register a car in Estonia, depending on who will own and use it. A car in Estonia can be registered to an individual or to a company. Individuals and company representatives should go to the Estonian Road Administration office with all the required documents to complete the registration procedure. Each of these types of registration has its own characteristics and a list of the necessary documents, actions needed to be carried out. So it is worth taking some time to properly prepare the documents before proceeding. Here we will discuss the various steps involved in registering a car in Estonia.

Residency requirements for car registration in Estonia

All persons with residence permits are required to register their vehicles in Estonia. The only exceptions are for diplomats and military personnel serving abroad. If you are working in Estonia but have a residence permit in another country, you will have to register your vehicles with the authority.

Documents required to register a car in Estonia

To register a car in Estonia you will need documents such as:

• A valid vehicle registration certificate from your country of origin
• Proof of private/company registration in the country of origin or other registration documents
• A valid insurance policy (if you are registering a car in Estonia for a company, you will need a statement that the vehicle is insured)
• Valid driver’s license or a photocopy of it (translation and international driving permit are also accepted)
• A completed application form
• A valid identity card or passport
• A passport-size photo

Company in Estonia vs. car purchase

An Estonian company can also purchase a car in another EU country, including Poland. This purchase is often more financially advantageous than buying from a dealer in Estonia. The car is purchased at a net price, as an Intra-Community Delivery of Goods (ITA). If it will be used for business purposes, Estonian VAT is charged and deducted in the same VAT return in Estonia. Thus, it is economically neutral and not subject to payment to the Tax Authority. There is no excise tax on passenger cars in Estonia. Thus, there is no excise tax on cars in Estonia. If the car was not subject to registration in Poland (first registration in Estonia) – the company may apply for a refund of the excise tax collected in Poland (depending on the car model – up to 18.6%).

Fees for car registration in Estonia

There are two sets of fees that you will have to pay to register a car in Estonia – an administrative fee and an insurance fee. The administrative fee is a one-time fee for the administrative steps involved in registering a vehicle. This fee is usually payable at the time of application. The insurance fee is a regular payment for motor insurance. The insurance fee must be paid annually. Details on registration fees can be found on the Road Administration’s website.

Taxes and car registration in Estonia

When you buy a vehicle in Poland before registration, you can deduct the excise tax included in the price of the vehicle, which is included in the price of those destined for the Polish market. If you buy a car with a capacity of less than 2,000 cc, the excise tax is not a big expense, as it amounts to 3.1% of the net value of the vehicle. The excise tax rate rises to 18.6% on the value of the vehicle if its capacity exceeds 2000 cc.

Transporting and registering the vehicle in Estonia is an expensive procedure that the dealer must arrange on his own behalf. The country’s capital, Tallinn, is more than 900 kilometers from Warsaw. If we are an EU VAT payer and our company buys the car in Poland and has it delivered to Estonia, VAT will be charged on a reverse charge basis. Since we will buy the car at the net price, we will be able to make a full charge and deduction. In Estonia, you can deduct 100 percent of the VAT on the purchase and use of the car, so the company will make a full accrual and deduction.

For a company with no history, controlled by a foreigner, it is virtually impossible to obtain financing in Estonia (and many other European countries) in the form of a lease or loan. A cash purchase is therefore the optimal solution. A technical inspection of the car, which must take place in the country of registration, is also crucial. First registration in Estonia is somewhat more difficult than in Poland, but in practice it takes no more than seven days. The first technical inspection is required within three years of the vehicle’s first registration, and subsequent inspections are conducted annually. The choice of insurers in Estonia is limited due to the country’s size, while policy prices are comparable to those in Poland.

Private vs. company car registration in Estonia – which to choose?

The best way to figure out which option is best is to look at the various application procedures. Private registration – this is the most popular option for registering a car in Estonia. It is suitable for those with a valid driver’s license, a clean driving record and a vehicle that has not been registered before. Corporate registration – This option is suitable for those who have a valid registration from their home country and wish to transfer it to Estonia.

How can we help you?

Thompson&Stein law firm specialists offer assistance in:

• Organization of the vehicle registration test (a mandatory part of the registration)
• Registration of the vehicle in Estonia – also with the help of our attorney. We also assist in obtaining special and individual plates.
• Purchase of appropriate liability and AC insurance
• Application for reimbursement of excise tax directed to Polish tax authorities.
• Correct settlement of the purchase and use of the vehicle in your Estonian company.

Remember that the registration process can take some time, especially if you are applying for private registration. So it’s better to start as soon as possible to avoid unnecessary delays. Remember to gather the required documents and make an appointment at the Road Administration office. The sooner you start, the sooner you will be able to drive your car freely on Estonia’s roads!

What should a 21st century country be like? First and foremost, digitalized. It was this thought that guided Estonia many years ago, when mechanisms were implemented to develop the country’s Internet sphere. The introduction of electronic identification in 2002 was a bold and innovative step. However, it is such decisions that today Estonia is the world leader in e-government services.

What is X-Road in Estonia? 

So what is “x-road” in Estonia? It is an infrastructure for secure data exchange for Estonian residents, businesses and public institutions. The system was designed in such a way that, with maximum efficiency and the highest standards of protection of stored data, the project costs were kept reasonable. The built system is therefore based on blockchain technology and data decentralization. This keeps the cost of infrastructure and its operation to a minimum.

What does e-Estonia mean? 

So what does e-Estonia mean in practice? A number of possibilities for its users! Examples of services include e-Ticket, e-School, e-Tax Board and one of the most interesting ideas – e-Voting. With its help, Estonians can participate in elections online. The services provided mean receiving prescriptions from a doctor electronically, digitally signing documents (along with the ability to encrypt them for a specific user). The systems used make attempts at fraud or unauthorized use of data detectable in an instant.

One of the more interesting systems is the yet-to-be-implemented artificial intelligence for adjudication in courts. It is to be used in lower-level cases. The computer will issue a verdict based on a prior analysis of the file. Studies have shown that this will benefit the efficiency of the courts. The verdict will be appealable to a traditional court.

Estonian data embassy

It is interesting to note that an Estonian data embassy was opened some time ago. It is located on Luxembourg territory and its task is to secure state resources in case Estonia loses territory or other situations that would lead to the destruction or immobilization of systems located directly in the country.

And how does E-Estonia work in practice? Perfectly! The capabilities offered by the system are widely used by Estonian residents – if only in the way that practically one in three Estonians votes online. The system has also secured Estonia’s status as Europe’s digital capital, while generating savings of 2% of GDP. In addition, the country annually climbs the rankings for ease of doing business.

Verify if the company has paid-up share capital

In order to pay out a dividend from an Estonian company the minimum share capital of 2500 euros has to be paid in advance. When establishing a company in Estonia, you have the possibility to postpone the payment of the share capital until after the whole process of registration is completed. This may lead to a situation in which the company operates despite unpaid share capital. Therefore, before you decide to pay out a dividend make sure that the share capital had been fully paid.

Make sure you have met all the formal requirements

The payout of dividend is made on the basis of the financial result shown in the annual report. That’s the reason why the Estonian company’s annual report has to be accepted and signed by all members of the board. In addition, make sure that the amount you wish to pay out does not exceed the retained/not distributed profit shown in the company’s annual report. Moreover, you should ensure that after the pay out of the dividend company’s net assets will not fall below the value of the paid-in or minimum share capital – depending on which of these values is higher. If you met all the conditions mentioned above, you can proceed to the next step.

How does the process of the dividend payout look like?

The decision on the payment of the dividend is made by the General Meeting of Shareholders on the basis of the annual report. Mentioned decision takes the form of a resolution which should be adopted by the required majority of votes. It is worth noting that the articles of association may require a stricter majority of votes than it is specified in the Estonian Commercial Code. Therefore, this issue should be considered individually for each entity.

After the decision of paying out the dividend is made, the Estonian company pays out the amount indicated in the resolution to bank accounts of the shareholders or partners.

Payout of the dividend – What’s next?

You should remember that a decision itself to pay out a dividend is an economic event which, according to accounting rules, should be recorded in the company’s accounting books. Moreover, the moment of the dividend payout should also be included in the books. The company has to show the dividend paid out in the attachment No 7 to the TSD tax declaration. The dividend tax must be paid by the 10th of the month following the month of the actual payment.

In conclusion, the dividend payout from the Estonian company is based on clear and transparent rules and should not generate any problems. If you meet the basic requirements, all you have to do is prepare a resolution and enjoy the paid-out funds.