Submission of declaration form TSD

Examples of declaring payments made to non-residents

As of 1 January 2022, a natural person resident in a member state of the European Economic Area (EEA) (EU Member States, Iceland, Liechtenstein, and Norway) is entitled to benefit from basic exemption on a monthly basis like a resident of Estonia.

The amendment to the Income Tax Act, which entered into force in 2022,  does not extend the circle of persons who are entitled to use basic exemption in Estonia, but allows them to do so on an ongoing basis. Until the end of 2021, residents of EEA member states had the right to submit an income tax return once a year in order to apply Estonia’s basic exemption and obtain a refund in the amount of overpaid income tax. 

Payments to non-residents should be declared by the payer (employer) in Annex 2 to the Form TSD. The right to apply Estonia’s basic exemption can be used only in the case where residents of EEA member states:

• submit an application to the payer for the application of Estonia’s basic exemption (up to 654 euros with an one-off application, which can be amended), and
• a certificate of residence for tax purposes confirmed by the tax authority of the recipient’s home country (NB! an EEA member state) has been entered in the database of the Estonian Tax and Customs Board before submitting Annex 2 to Form TSD.

Payers (employers) can check the validity of certificates of residence by the inquiry of non-residency. 

Residents of third countries (for example Russia, Ukraine, USA, Canada etc.) are not entitled to apply for the Estonia’s basic exemption neither on the Annex 2 to Form TSD nor the recipient’s income tax return.

When calculating basic exemption, the same rules apply as in the case of resident natural persons.

• If the recipient of the payment receives taxable income from several withholding agents, they may submit the above-mentioned application to only one withholding agent of their choice. 

• The amount of basic exemption may not be less than zero and more than 654 euros. In their application, taxpayers may apply for deduction of a lower amount. 

• The amount of the basic exemption declared may not exceed the amount of payment declared.

• The recipient taxpayer may, during a calendar year, amend their decision (application) on the amount of basic exemption, depending on the amount of income, but also cancel the application so that basic exemption does not apply.

• Payments made to the same non-resident in the same month are aggregated for the purpose of calculating the basic exemption.

• The amount of basic exemption not used in the previous calendar month is not taken into account in the following calendar month. 

• If the payment is subject to basic exemption under a tax treaty, the type and amount of basic exemption is not filled in.

Additional information