Expat Taxes for Americans Living in Estonia: A Complete Guide

Living as an American Expat in Estonia

Estonia is known for its vibrant culture and rich history. As an expat, this Baltic country may be the ideal place to make your home. But before you head off to explore the medieval towns, let’s take a look at what expat taxes you can expect as an American living in Estonia.

Estonian Taxes at a Glance

• Tax Year: January 1–December 31
• Tax Deadline: April 30
• Currency: Euro (EUR)
• Population: 1.3 million
• Number of US Expats: Estimated 1,000+
• Capital City: Tallinn
• Primary Language: Estonian
• Tax Treaty: Yes
• Totalization Agreement: No

What Are Expat Taxes like for Americans Living in Estonia?

When discussing expat taxes, it’s always worth noting that Americans living overseas are still required to file a US tax return every year. You may even have to file additional forms as an American abroad, such as an FBAR or a FATCA report. (More on both below.)

Beyond this, most US citizens living in Estonia will have to file an Estonian tax return. Fortunately, Estonia has low taxes and a simple tax policy.

Who Has to File Taxes in Estonia?

Estonia uses a residence-based taxation system. This means that residents are taxed on their worldwide income, while non-residents are taxed only on income that comes from an Estonian source.

Who Qualifies as a Tax Resident in Estonia?

If you spend 183 or more days in Estonia in any 12-month period, you will be considered a resident for tax purposes. These days do not have to be consecutive, and a partial day in Estonia will count as a full day toward this figure. Once you meet the 183-day standard, you will be considered a resident retroactively from the day you arrived in Estonia. If you do not meet this standard, you will be considered a non-resident for tax purposes. 

What Types of Taxation Does Estonia Have?

Income

Estonia’s income tax policy is remarkably simple. All income is taxed at a flat rate of 20% regardless of income level. Virtually all forms of income are taxable under this policy, including:

• Salaries and wages
• Self-employment income
• Capital gains
• Rents
• Royalties
• Interest
• Dividends
• Pensions
• Scholarships and grants
• Prizes
• Lottery winnings

Residents and non-residents are both taxed at the same 20% flat rate. The only distinction is that residents must report their worldwide income, while non-residents only have to report Estonia-source income.

Capital Gains Tax

Capital gains are taxed as ordinary income at a flat rate of 20%.

Social Security Tax

Employers based in Estonia must pay a social security tax. The rate for this tax is 33% of an employee’s salary, with 20% going to a public pension fund and the remaining 13% going to a public health insurance fund. The full amount is covered by the employer. Employees are not required to contribute to the social security tax at all. Self-employed professionals must pay the full 33% as well.

Unemployment Insurance Tax

In Estonia, employers and employees must contribute to an unemployment insurance fund. The rate for this tax is 2.4% of an employee’s salary. The employer contributes 0.8%, while the employee contributes 1.6%.

Value-Added Tax

Estonia levies a value-added tax (VAT) on certain goods and services. The standard rate for this tax is 20%. However, some goods and services are taxed at a reduced rate of 9%. This includes:

• Books
• Periodicals
• Hotel accommodations
• Listed pharmaceuticals

Corporate Tax

Just like with individuals, resident corporations are taxed on their worldwide income, while non-resident corporations are only taxed on Estonia-source income. All undistributed corporate profits are exempt from taxation. Once the profits are distributed, they are generally taxed at a flat rate of 20%. For companies making regular profit distributions, a reduced rate of 14% may be available.

Land Value Tax

Estonian land is taxed at the municipal level. This tax is applied annually, with rates ranging from 0.1% and 2.5% of the value of the land, depending on the municipality. Landowners are generally responsible for paying the land value tax, though in some cases, the person using the land will be responsible instead.

Local Taxes

Estonian municipalities may have local taxes, such as:

• Advertisement tax
• Road and street tax
• Motor vehicle tax
• Animal tax
• Entertainment tax
• Parking charges

However, these local taxes are always very low.

When Are Taxes Due in Estonia?

Just like in the US, the Estonian tax year is the same as the calendar year: January 1 to December 31. Annual tax returns are due on April 30 of the following year.

Does the US Have a Tax Treaty with Estonia?

Yes. The US has agreed to a tax treaty with Estonia. This treaty defines which country an expat will owe taxes to on a given stream of income, removing the risk of double taxation. In most cases, you will pay taxes to whichever country you are considered a resident of for tax purposes.

Does the US Have a Totalization Agreement with Estonia?

No. There is no US-Estonia totalization agreement. This means that Americans living abroad in Estonia may have to contribute to both social security systems. 

Get Help with Your Expat Taxes

Hopefully, this guide has helped you understand what expat taxes to expect as an American living in Estonia. If you still have questions, we have the answers. In fact, we can even prepare and file your expat tax return on your behalf.