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What expenses are NOT deductible?

Here are some examples of expenses that are not considered deductible:

Fuel, and car trips within the same country. Travel between countries to visit clients is deductible, but to prevent you from using your car for personal use, fuel expenses within your country are excluded. However, public transportation is always deductible.

Food, meals, drinks, lunch expenses.

Vacations and pleasure trips, obviously. And also be careful if you decide to “visit a client” from December 24 to 26, for example.

Permanent office (more than 6 months a year). This is to prevent your home country (or any other country) from considering your company tax resident there. You are not allowed to have an office or premises for more than 6 months of the year.

Expenses that imply a permanent establishment in a country, especially outside of Estonia. Examples include: internet connection for a house, apartment, or wifi, water, electricity, or other utility bills, a car, or car leases for more than 6 months. Remember, Companio supports online, location-independent activities.

e-Residency application or renewing fee

The deductible expenses of your company (that is, that makes sense given the activity of your company) are tax-free because they are money that is reinvested in the company. However, to be able to deduct them for accounting purposes, they must comply with a series of rules:

There must be a justification. For example, for Airbnb accommodation, you have to prove that you are going to work with a startup, visit a client, attend a conference, or study culture for your blog if it is your main source of income.

You must have documentary support, that is, an invoice or contract that justifies it. If it is an AirBnB accommodation, for example, a rental contract in the name of the company. In the case of an invoice, it must have the name of your company, registration number, registered office, and VAT or VAT number (if you have one).

They are paid with the company card, or with your bank account. As an exception, you can pay with your personal accounts (such as out-of-pocket expenses) if you cannot pay with your corporate accounts or cards.

Avoid paying for any non-deductible expenses (such as food, a pair of jeans, or a vacation trip) with your corporate accounts or cards, as these expenses will be reimbursed from your personal finances to company funds later.

Updated on: 16/04/2024

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