Entrepreneur Account

An Entrepreneur Account is useful for a person who provides services to other private persons in areas of activity which do not require large expenditures to be made in advance. For example, a babysitter, domestic help, gardening and repair or construction work, which are not accompanied by large business expenses. The costs of some of those services is borne by the party who orders: for example, the party who orders repair or construction works purchases their own repair tools and materials.

An Entrepreneur Account is also useful for those who sell goods that they have prepared themselves to physical as well as legal persons, in the event that the cost of raw or source material is not very high in comparison with the sales price for the goods. Such areas of activity are, for example, handicrafts and art, and the selling of home-grown or prepared foods.

The user of an Entrepreneur Account does not have the option to deduct expenses. Which is why an Entrepreneur Account is not suitable for those whose main area of activity is intermediating goods purchased elsewhere or for whom the cost of materials necessary for the manufacturing of goods or provision of services comprises a large part of the sales price.

In areas of activity which are accompanied by direct input costs, it is more practical to operate as a self-employed person (FIE) or incorporated entity.

If the income is up to 25,000 € per calendar year, the tax rate is 20% of the sum received in the Entrepreneur Account.

If the income for the calendar year exceeds 25,000 €, the amount exceeding it will be subject to a 40% tax rate.

If the income received in the Entrepreneur Account exceeds 40,000 € per calendar year, the person is obligated to register themselves in the commercial register as an undertaking (FIE, OÜ) and the Tax and Customs Board as a person liable for value added tax. A registered undertaking is required to keep accounts and accounting for taxation purposes.

The user of an Entrepreneur Account has the right to health insurance in the event that the social tax paid during a calendar month to the Tax and Customs Board is at least equivalent to the mandatory minimum social tax.

According to the Labour Market Services and Benefits Act, a person can not be registered as unemployed if the person provides a service or sells goods within the meaning of the Simplified Business Income Taxation Act; accordingly, conclusion of the Entrepreneur Account Agreement results in the termination of registration of a person as unemployed.

Broadly speaking, the same rules that apply to a bank account also apply to an Entrepreneur Account. For example, the account holder can order a bank card and card payment terminal that are associated with the account.

The exception is investment services: Securities transactions cannot be performed with an Entrepreneur Account.

In the case of everyday transactions not associated with an Entrepreneur Account it is recommended that other bank accounts be used, in order to avoid deposits leading to the creation of an erroneous tax burden being made to the Tax and Customs Board.

If an amount has been deposited in the Entrepreneur Account by mistake and it has been subjected to business income tax, the user of the Entrepreneur Account must submit a written application along with evidence to the Tax and Customs Board. With this the user will explain why the sum in question is not subject to business income tax. If the evidence is sufficient, the Board will refund the erroneously paid tax to the person’s prepayment account.