Do I Need to Pay Taxes in My Country Instead of Estonia?
If you are a tax resident in a country with CFC rules (such as most European countries, USA, Canada, UK, Australia, etc.), there may be situations where local authorities claim that your company must pay taxes there instead of doing it in Estonia.
The law says that this may occur for entities that:
Have been incorporated according to local laws: this situation will never happen if you found your company in Estonia.
Have their registered office in the local territory: this means that you cannot have your permanent headquarters outside of Estonia. For example, you cannot rent or buy an office for your company in Germany, the US, or Australia.
Have their effective management headquarters in the local territory: varies from country to country, but generally means that the majority of the members of the board cannot reside (i.e. be a tax resident) in a country with CFC rules. For example, if you are the only member of the board and you live in Germany, the German authorities will conclude that your effective administrative headquarter is in the country and, as such, will require your company to adhere to German tax laws and pay taxes in Germany.
In this scenario, you will lose the benefits of taxation only on the distribution of profits and we will not be able to continue offering you our services.
IMPORTANT NOTE: With the new European Directive on tax avoidance of January 2020, these CFC rules do not apply to European citizens under certain conditions. That means that you can live (and be a tax resident) in any European country and manage your Estonian company online from there, without the need to be a digital nomad.
The law says that this may occur for entities that:
Have been incorporated according to local laws: this situation will never happen if you found your company in Estonia.
Have their registered office in the local territory: this means that you cannot have your permanent headquarters outside of Estonia. For example, you cannot rent or buy an office for your company in Germany, the US, or Australia.
Have their effective management headquarters in the local territory: varies from country to country, but generally means that the majority of the members of the board cannot reside (i.e. be a tax resident) in a country with CFC rules. For example, if you are the only member of the board and you live in Germany, the German authorities will conclude that your effective administrative headquarter is in the country and, as such, will require your company to adhere to German tax laws and pay taxes in Germany.
In this scenario, you will lose the benefits of taxation only on the distribution of profits and we will not be able to continue offering you our services.
IMPORTANT NOTE: With the new European Directive on tax avoidance of January 2020, these CFC rules do not apply to European citizens under certain conditions. That means that you can live (and be a tax resident) in any European country and manage your Estonian company online from there, without the need to be a digital nomad.
Updated on: 11/08/2022
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