Determining residency

The instructions for determining the residency of a natural person for tax purposes explains when is a natural person considered a resident for tax purposes, gives an overview of the circumstances of change of residency and the obligation to declare and pay income tax.

     

From 1 June 2022, the application for determination of residency for tax purposes (form R) can be submitted
in e-services environment e-MTA.

Submitting the application for determination of residency in the e-MTA is more convenient and takes less time. The possibility to submit the application on paper and by e-mail will also remain.

Definition of a resident for tax purposes

Pursuant to subsection 6 (1) of the Income Tax Act, a natural person is a resident of Estonia if at least one of the following requirements is met:

  • the person’s place of residence is in Estonia;
  • the person is staying in Estonia for at least 183 days over the course of a period of 12 consecutive calendar months;
  • the person is an Estonian diplomat who is in foreign service.

The application for determination of residency for tax purposes can be conveniently submitted in the e-services environment e-MTA.

Determine residency

The basis for determining the residency for tax purposes consists of three criteria. If at least one of these criteria is met, the person will be considered as a resident in Estonia. With Estonian residents, the change of the place of residence is important for determining the residency for tax purposes. With persons arriving in Estonia from abroad for a temporary visit, the number of days spent in Estonia is important. A person is considered a resident from the date of his or her arrival in Estonia.

The person must inform the tax authority of the circumstances related to the change of residency and submit an application for determination of residency (form R) to the Tax and Customs Board (subsection 6 of § 6 of the Income Tax Act).

NB! A resident natural person must pay income tax on all income derived by him or her in Estonia and outside Estonia, regardless of whether the income is listed in §§ 13–22 of the Income Tax Act or not.

Non-resident

A non-resident is a natural or a legal person not specified above. A non-resident pays income tax only on the income received in Estonia.

When determining residency, it is necessary to take into account from which foreign country the person arrives from or goes to, because if a Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion (tax treaty) has been concluded with this country, double residency must be avoided. Double residency is a situation where a person is considered to be a resident in two countries. 

If the residency determined on the basis of a tax treaty differs from the residency determined under Estonian law or if the tax treaty (or any other international agreement) prescribes more favourable conditions for the taxation of income than those provided by law, the provisions of the tax treaty are applied.

Change in residency

A person must inform the tax authority of the circumstances related to the change of residency for tax purposes and submit the application for determination of residency (form R) to the Tax and Customs Board (subsection 6 of § 6 of the Income Tax Act).

In the case of the change in a person’s permanent or primary place of residence to another country, the residency for tax purposes will change as of the date when the change in the place of residence takes place. For persons who are staying in Estonia temporarily, the tax residency will begin and end according to the calculation of the days during which the person stays in Estonia. In order to avoid double residency according to the tax treaty, in every particular case the dates of beginning and end of the residency in another country will be also taken into account on the basis of the certificate of residency for tax purposes confirmed by the tax authority of that country.

A non-resident natural person is deemed to be a resident in Estonia as of the first certified date of arrival in Estonia.

A natural person who arrives in Estonia submits an application for determination of residency (form R) to the Tax and Customs Board. The Tax and Customs Board may make an entry to the database immediately, at a person’s request, on the determination of the person’s status as a resident on his or her arrival in Estonia, if there is reason to presume, on the basis of the data submitted by the person, that he or she is staying in Estonia for at least 183 days over the course of a period of 12 consecutive calendar months or he or she has come to Estonia with the intention to settle in Estonia. If a person comes from a country with which Estonia has concluded a tax treaty, possible double residency will be ascertained and eliminated in each case according to particular circumstances and the tax treaty.

A natural person who has a place of residence in Estonia (either permanent or primary) is deemed to be a resident for the whole period of taxation pursuant to the Income Tax Act, regardless of the number of days he or she has stayed in Estonia. Upon change of place of residence, residency for tax purposes is deemed to have changed as of the date of change of place residence.

A natural person who has arrived in Estonia is a resident for tax purposes if he or she stays in Estonia for at least 183 days over the course of 12 consecutive calendar months. A natural person is deemed to be a resident as of the first day of his or her arrival over the course of 12 consecutive calendar month. A natural person who has arrived in Estonia is deemed to be a resident until the day of departure (included), unless the person has established a permanent, lasting or primary place of residence in Estonia.

If a natural person is a resident in Estonia on the basis of the Income Tax Act, but the same person is deemed to be a resident in another country on the basis of a tax treaty, the person will be registered as a non-resident in Estonia as of the date of the creation of residency according to the tax treaty in that other country.  In order to register as a non-resident, the person notifies the Tax and Customs Board of the circumstances of the change of his or her residency in form R and submits a certificate of residency certified by a foreign tax authority received from another country.

If the circumstances related to changing person’s residency for tax purposes become apparent considerably later than the date of arrival in Estonia, the person will be registered as a resident retrospectively from the first day of arrival in Estonia.

NB! If the circumstances affecting residency change, the person is required to notify the Tax and Customs Board of the changes as soon as possible on the application for determination of residency (form R).

If a resident natural person settles elsewhere in a manner whereof one can draw the conclusion that the person intends to change his or her place of residence (subsection 3 of § 14 of the General Part of the Civil Code Act) and there is no place of residence left for him or her in Estonia, and the person does not stay in Estonia for more than 183 days over the course of a period of 12 consecutive calendar months, and he or she is not an Estonian diplomat, then he or she will be deemed to be a non-resident in Estonia as of the day following the date of leaving Estonia.

A resident natural person who has reason to presume that his or her status as an Estonian resident will change as he or she leaves Estonia must submit his or her application for determination of residency (form R) to the Tax and Customs Board. A natural person will be registered as a non-resident in Estonia, if the person no longer meets or there is reason to presume that he or she will not meet (in the future) the conditions provided for in § 6 of the Income Tax Act.

The Tax and Customs Board, having analysed the circumstances concerning a person’s residency for tax purposes (also the future circumstances, if known), will make an entry of the person’s residency in the database of the Tax and Customs Board. A person will be registered as a non-resident as of the day following the day when the person leaves Estonia. If it is not possible to determine on the basis of the data submitted by the person or collected by the Tax and Customs Board whether the person's status as a resident needs to be changed when leaving Estonia, the relevant decision will be made, if necessary, afterwards when all circumstances are evident.

Moreover, if a person leaving Estonia is an Estonian resident on the basis of the criteria provided for in subsection 1 of § 6 of the Income Tax Act, but he or she leaves for a country with whom Estonia has concluded a tax treaty and he or she is deemed to be a resident in that country pursuant to the valid tax treaty, the person will be registered as a non-resident as of the day when the person is deemed to be a resident in that other country pursuant to the tax treaty. In order to avoid double residency on the basis of the tax treaty, a person must submit to the Tax and Customs Board the certificate of residency for tax purposes confirmed by the tax authority of the other country.

NB! If the circumstances affecting the residency change, the person is obliged to notify the Tax and Customs Board about the changes on the first opportunity by submitting the form R.

If the Tax and Customs Board, regardless of the certificate of residency issued by the tax authority of another country, has reason to doubt the person’s residency within the meaning of the tax treaty, the tax authorities of the two countries will determine the tax residency of the person in accordance with the criteria provided for in the tax treaty in the course of mutual agreement procedure.

On determining the place of residence, we proceed from the definition of a place of residence in § 14 of the General Part of the Civil Code Act, according to which the place of residence of a person is the place where he or she permanently or primarily lives. Under this provision, the place of residence may simultaneously be in several places and the place of residence is deemed to be changed if the person settles elsewhere in a manner that expresses his or her intention to change the place of residence. If the place of residence of a person cannot be determined, the place where he or she is staying each time is deemed to be his or her place of residence.

The place of residence is deemed to be permanent if it is clear that the place of residence is established for permanent use, contrary to the conditions wherefrom it can be seen that the person intends to dwell at the said place for a short time only.  The place of residence can be either a house or an apartment, as well as a room or a dwelling place of the same kind, owned by the person himself or herself, rented or otherwise possessed by a person for the permanent dwelling (e.g. also an apartment of the spouse or the room rented by the employer).

To determine a person’s place of residence, it is important that the place of residence would be permanent and lasting, i.e. it must be apparent that the person has made preparations or efforts for making the place of residence permanently available for himself or herself all the time, not acquired for the purpose of short-term dwelling (a holiday trip, a business trip, a study trip, training courses, etc.). Possession of property (as well as an immovable) in Estonia itself does not make a person a resident for the purposes of the Income Tax Act.

NB! If the home of a person is rented out to other persons, this is not deemed to be the person’s place of residence.

For the determination of the residency for tax purposes, only the days when a person was present in Estonia within 12 consecutive calendar months will be taken into account for calculating the 183 days. For example, a person may have an employment contract for 9 months, but in fact, he or she will only be present in Estonia for 5 days a month. In this case, these 5 days are taken into account, not the whole calendar month. All the days on which the person is staying in Estonia will be counted up, despite of the reasons of staying here (except the cases when the person who had to leave Estonia could not do so for good reason and reasons beyond his or her control, for example, a serious illness).

In addition to the full days during which a person was staying in the country, days spent in Estonia partially (including days of arrival and departure) will be included in the 183 days.

The full days on which a person is not in Estonia, whether on holiday, on a business trip or for some other reason, will not be included in the 183 days. Whereas the days, during which the person was staying in Estonia, nevertheless how short time, will be counted as one day in the 183 days.

EXAMPLE

A person is staying in Estonia from 1 January to 2 July (i.e. 182 days) and then one more day on 31 December. The person is deemed to be a resident from 1 January to 31 December (also in the period from 3 July to 30 December).

Concerning the change in the status of a natural person (from a resident to a non-resident or vice versa), the Tax and Customs Board will make a corresponding entry to the data of the person in the database. If a person arrives in or leaves Estonia due to circumstances that may affect his or her residency, the person must turn to the Tax and Customs Board for the determination of his or her status of residency for tax purposes by submitting the application for determination of residency (form R), where the person gives an overview of the significant circumstances affecting his or her residency by answering questions. If necessary, the Tax and Customs Board has the right to request additional certificates and documents from the person.

The Tax and Customs Board can also determine the residency of a person based only on collected data, if it is not possible to obtain data from the taxpayer or if the information received is not reliable.

In the case of change in residency of people living in Estonia, the existence or change of the place of residence and the transfer of vital interests to a foreign country in connection with the change of the place of residence are important for determining residency. The number of days spent in Estonia is important with people arriving temporarily from abroad. According to the legislation of different countries, a person may be considered a resident in several countries at the same time, so a person may have double residency. If a tax treaty has been concluded and is in force between Estonia and the other country, it is possible to avoid double residency.

In order to apply the avoidance of double residency arising from a tax treaty, a person must submit a certificate of tax residency confirmed by the foreign tax authority. Form TM3 or certificates certified by foreign tax authorities containing similar data may be used.

If, upon arrival, the known circumstances do not allow to determine the change of residency of the person in the future (for example, there is no official address of place of residence, residence permit, entry in the employment register or other similar proof of arrival in Estonia), the status of the person as a resident or a non-resident is deemed to be unchanged until the circumstances have become clear (e.g. until the person has stayed in Estonia for at least 183 days). The person then contacts the Tax and Customs Board, introduces the changed circumstances and submits the application for determination of residency (form R) and the necessary documentary evidence. The residency will be changed afterwards and as of the date of arrival/departure. Since the tax residency of a person affects the tax liability calculated on income, the possible recalculation of taxes is made on the basis of the income tax return of a resident natural person, on the income and social tax return submitted by the payer on the form TSD or in the tax notice (e.g. if the income of a non-resident has been subject to deductions of a resident which were not permitted to a non-resident, the non-resident must pay the assigned income tax). Overpaid amounts of taxes will be refunded on the basis of the income tax return of a resident natural person or pursuant to § 106 of the Taxation Act.

The entry of the Tax and Customs Board regarding the tax residency of a person is the basis for the payer (e.g. employer) who does not decide whether the recipient of the payment is a resident or not. If the payer has information different from that of the tax authority with regard to the residency of the person, the payer must inform the tax authority thereof.

If the Tax and Customs Board, regardless of the certificate of residency issued by the tax authority of another country, has reason to doubt the person’s residency within the meaning of the tax treaty, the tax authorities of the two countries will determine the tax residency of the person in accordance with the criteria provided for in the tax treaty in the course of the mutual agreement procedure.

The person himself or herself has the right to initiate the mutual agreement procedure for the elimination of double residency by submitting a corresponding request to the tax authority. The mutual agreement procedure is generally governed by Article 25 of tax treaties.

After analysing the circumstances and evidence, the Tax and Customs Board will make a notation concerning the person’s tax residency in the database of the Tax and Customs Board and, at the request of the person, issues a certificate concerning the registration of the person as a resident or a non-resident. Data about persons’ residency for tax purposes is public information.

Declaration and obligation to pay income tax

Resident natural persons must declare their worldwide income in Estonia. It means that they must pay income tax on both Estonian and foreign income, double taxation is avoided in Estonia. Non-residents are liable to tax in Estonia only on Estonian income. If income tax on the non-resident’s income taxable in Estonia has been withheld in Estonia or at the rates provided for in the tax treaty, the non-resident is not obliged to declare such income. 
Non-residents must declare the taxable business income and the gains derived from the transfer of property received in Estonia and taxed pursuant to § 29 of the Income Tax Act, as well as the income taxable pursuant to § 41, wherefrom the income tax has not been not withheld. Double taxation will be avoided in the person’s country of residence.

If a person is deemed to be a resident in several countries pursuant to the legislation of different countries, double residency can be avoided on the basis of tax treaties. If a person is deemed to be, pursuant to the tax treaty:

  • a resident in Estonia, the person must declare his or her worldwide income in Estonia;
  • a resident in another tax treaty country, not Estonia, the tax incentives and exemptions under the tax treaty will apply to the person, taking into account the obligations of a non-resident on declaration of the taxable income received in Estonia. In order to apply the tax incentives or exemptions to the income of a non-resident under the tax treaty, a person must submit the certificate of residency for tax purposes confirmed by the tax authority of the other country.

Frequently asked questions on tax residency

Residency for tax purposes (tax residency) is a term used when determining whether a person pays income tax in that country on his or her worldwide income or only on that country’s income.

The Social Insurance Board or the Estonian Unemployment Insurance Fund will also verify the recipient’s tax residency when deciding on granting benefits and supports.

The amount of income tax calculated on a person’s income also depends on tax residency, because non-residents have a different income tax rate for some types of income (licence fee, performance fee 10%) or there is a different tax exemption (interest).

For example, a non-resident cannot deduct the basic exemption (up to 6,000 euros per calendar year) from his taxable income in Estonia if he or she is not a resident in a country that is a member of the European Economic Area (European Union Member States, Iceland, Liechtenstein, Norway).

Tax residency does not depend on or alter the citizenship of a person, i.e. residency does not residency grant citizenship or take it away.

A resident of Estonia is a person whose permanent place of residence is in Estonia or who stays in Estonia for at least 183 days within 12 consecutive calendar months. Double residency is also avoided; i.e. if a person is a tax resident in another country, it is important to consider whether the person has a place of residence only in Estonia, where is his or her family, where he or she is spends more time.

Tax residency cannot be decided by a person himself or herself, because it depends on his or her connection to Estonia: where is his or her home, family, and where does he or she spend more time.

Since all these circumstances need to be considered as a whole, but not all this information is available in the state databases, the person must contact the Estonian Tax and Customs Board and submit the application for determination of residency (form R).

The determination of residency is important for income tax to be calculated on the income of a person correctly and in the right country, and it determines the entitlement to some benefits or supports.

Estonian residents pay income tax in Estonia on their worldwide income, double taxation is avoided, foreign income tax reduces the Estonian income tax amount (if a certificate is available) or, depending on the type of income and circumstances, income taxed abroad is exempt from taxation in Estonia. On the basis of a one-time application, the basic exemption of up to 500 euros per calendar month can be deducted from payments made to an Estonian resident, depending on the amount of the person’s income.

A funded pension contribution is withheld from the salaries and wages of a resident if the recipient is of the corresponding age and has joined the second pillar pension. The contribution to the funded pension will not be withheld from a non-resident’s salaries and wages.

At the same time, for example, if a non-resident works outside of Estonia, his or her salaries and wages are not subject to any income tax at all in Estonia.

Since the amount of income tax depends on residency, in the case of incorrect data on residency in the database of the Estonian Tax and Customs Board, taxes on salaries and wages or other payments may be calculated in a higher or lower amount than required by law.

Thus, the application for determination of residency must be submitted both upon arrival in Estonia and upon departure.

In order to determine residency, one must fill in the application for determination of residency (form R) and answer the questions in it regarding arrival in Estonia; then sign and submit it to the Estonian Tax and Customs Board. Send the digitally signed form R by e-mail to emta@emta.ee, submit it in the Estonian Tax and Customs Board’s e-services environment e-MTA (select Registers and inquiriesRegistrationDetermination of residency from the menu) or submit it on paper in a service bureau.

A notation on the residency is made to the database of the Estonian Tax and Customs Board according to the answers of the person, which allows payers to obtain this information about the recipient’s tax residency status and to calculate the taxes correctly on payments made in Estonia.

If a person leaves Estonia, he or she must submit an application for determination of residency on departure from Estonia.

Useful to know

Since in Estonia the basic exemption depends on the person’s worldwide income, the final tax amount is calculated on the basis of the income tax return submitted by the person per calendar year. Some people, therefore, receive a refund of part of the income tax withheld on their wages and salaries and some have to pay additional income tax.

During the year, it is possible to check in the e-services environment e-MTA:

  • the taxes paid on your salaries and wages (Registers and inquiriesMy inquiriesMy employments), and
  • the use of basic exemption (Registers and inquiriesMy inquiriesMy income) because the person himself or herself can submit a request for the application of the basic exemption to one employer.

It is possible to check in the e-services environment e-MTA (My employments) whether an entry of employment has been made in the employment register. It should be noticed that the tax calculation is cash-based, i.e. if a person starts working in January and receives a salary in February, the data on the taxes paid on the salaries and wages will be visible after 10 March.

Last updated: 09.06.2022

Was this page helpful?