Business account- simplified taxation of business income from 01.01.2018

An business account is a separate account opened in a credit institution (bank) on behalf of a natural person, which receives the payments for the provided services and sales of goods, for which the account holder has given to the credit institution an instruction to book this amount and transfer an income tax into the Tax Board.

The bank acts here on behalf of a natural person, makes a declaration and transfers income tax.

Account owner can not be VAT payer or self-employed (as a self-employed person) in the same or a similar field of activity.

The tax period is the calendar month.

Tax rate:

1) 20% of the amount received to the business account, if the amount does not exceed 25 000 euros per calendar year

2) 40% of the amount received to the business account, which exceeds 25 000 euros per calendar year.

Health insurance:

A person who uses a business account is entitled to health insurance. If the paid business income tax exceeds the minimum social tax limit for obtaining health insurance, which is € 155.17 in 2017, then the person will also be entitled to health insurance. In order for a person to be entitled to health insurance with a business account, the company’s monthly income must be at least EUR 1292.5 in 2017.

Companies and self-employed entrepreneurs are not allowed to create a business account. In addition, the legal person must pay the “corporate income tax” from the amount of the service received from a natural person. (Otherwise, according to the Ministry of Finance: “entrepreneurs lose their motivation, create an employment relationships”.

! important announcement: the law is valid, but Estonian banks are not ready yet to offer such a service, because of lack of adequate capacity. The preliminary assessment is that maybe in September 2018.