How Do I Pay Freelancers and Contractors for Their Services?
The first thing you have to be clear about is differentiating whether they are professionals or individuals.
In that case, it’s as simple for them as issuing an invoice to your Estonian company. Our suggestion is, if they are Europeans, that they obtain a VAT number. Then, if your Estonian company has a VAT number too, their invoice will indicate VAT 0%.
In this case, charging for services offered to your company, depending on the country, may not be allowed for individuals.
To avoid any problems, you should always sign an employment or service contract with them. This contract must include at least the following:
The complete information of the service provider, including the full name, the complete address and the tax identification number (important).
The service to perform.
The hours to be assigned, whether periodic (eg 2h/week) or total (a total of 30 hours).
A clause that clearly specifies that the service provider is responsible for declaring and paying the taxes corresponding to that activity in their country of residence.
This contract must be written in English, as far as possible, in order to include it in your company's accounting and show it to the authorities if required.
It does not have to be if you follow the instructions that we have specified for the contract and your company has made an agreement respecting Estonian law.
This person, depending on their country of residence and applicable law, may or may not have problems with the local tax office, but that is their responsibility, of course. Our interest is the strict compliance of your company with the legislation.
Sometimes a company hires the services of an individual (not a freelancer), due to their refusal or inability to register as a professional, which may generate some doubts for the company receiving the service. If you don't know how to create these invoices or how to pay your contractors, please feel free to contact us here.
Freelancers and Professionals
In that case, it’s as simple for them as issuing an invoice to your Estonian company. Our suggestion is, if they are Europeans, that they obtain a VAT number. Then, if your Estonian company has a VAT number too, their invoice will indicate VAT 0%.
Individuals
In this case, charging for services offered to your company, depending on the country, may not be allowed for individuals.
To avoid any problems, you should always sign an employment or service contract with them. This contract must include at least the following:
The complete information of the service provider, including the full name, the complete address and the tax identification number (important).
The service to perform.
The hours to be assigned, whether periodic (eg 2h/week) or total (a total of 30 hours).
A clause that clearly specifies that the service provider is responsible for declaring and paying the taxes corresponding to that activity in their country of residence.
This contract must be written in English, as far as possible, in order to include it in your company's accounting and show it to the authorities if required.
Is accepting personal services a problem for my company?
It does not have to be if you follow the instructions that we have specified for the contract and your company has made an agreement respecting Estonian law.
This person, depending on their country of residence and applicable law, may or may not have problems with the local tax office, but that is their responsibility, of course. Our interest is the strict compliance of your company with the legislation.
Sometimes a company hires the services of an individual (not a freelancer), due to their refusal or inability to register as a professional, which may generate some doubts for the company receiving the service. If you don't know how to create these invoices or how to pay your contractors, please feel free to contact us here.
Updated on: 13/10/2023
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