Entrepreneur account

All individuals with an Estonian personal identification code (including e-residents) can open an entrepreneur account. To enter into an agreement, the individual must already be an LHV customer.

When using an entrepreneur account, the person cannot be a VAT liable person or operate as a self-employed person (FIE) in the same or similar area of activity.

If a customer is currently registered with the Unemployment Insurance Fund as unemployed and opens an entrepreneur account through LHV, this information will reach the Unemployment Insurance Fund and the customer’s unemployed status will end, regardless of whether the customer has received any funds on the entrepreneur account.

According to the Labour Market Services 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.

If a customer is currently registered with the Unemployment Insurance Fund as unemployed and opens an entrepreneur account through LHV, this information will reach the Unemployment Insurance Fund and the customer’s unemployed status will end, regardless of whether the customer has received any funds on the entrepreneur account.

An entrepreneur account is useful for a person who provides services 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.

Please note, if you provide services to a legal entity, the additional tax liability arises to this legal entity (see question 6 - Can the service be provided to a legal entity).

An entrepreneur account is also useful for those who sell goods that they have prepared themselves, 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.

Starting from 01.01.2025, the business income tax rate is 20% from the amount received to the entrepreneur account. If the entrepreneur account user has joined a second pension pillar, in addition to the 20 percent, 2% (or 4% or 6%, depending on the selected option) will be deducted from the account for payments to the second pillar.

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.

From each amount received in the entrepreneur account we reserve the tax sum and transfer it immediately to the Tax and Customs Board.

The tax amount reserved from the entrepreneur account and forwarded to the Tax and Customs Board is automatically divided into different tax types. If the entrepreneur account user has joined a second pension pillar, in addition to the 20 percent, 2% (or 4% or 6%, depending on the selected option) will be deducted from the account for payments to the second pillar.

In all of the previously described cases, 20 percentage points of the business income tax are distributed proportionally between income tax and social tax according to their nominal rates. Since from January 1, 2025, the income tax rate is 22%, the distribution of the paid business income tax is made according to the rules for income tax 22/55 and 33/55 according to the rules for social tax. For entrepreneur account users who have joined the second pillar, either 2%, 4%, or 6% will be transferred to the chosen pension fund or pension investment account.

When providing services to a legal person, keep in mind that a legal person has an additional income tax obligation (at a rate of 22/78), which makes the tax burden equal to the tax burden on an ordinary employment relationship. The additional tax obligation is to prevent conventional employment relationships from being directed to a more favourable entrepreneur account. There is no additional income tax obligation when selling goods to a legal person.

An entrepreneur account holder cannot issue invoices as he is neither an entrepreneur nor accounting responsible entity. The owner of an entrepreneur account provides services or sells goods based on oral agreement. However, he can also enter into a simple written agreement if necessary, where essential details of the provision of the service or sale of the goods are stated. Written expense document can also be a bank statement, a payment terminal receipt or cash receipt when paying in cash.

For example, upon making a transfer to an entrepreneur account, for a legal entity expenditure bank account statement (payment order) or cash withdrawal order containing the name, quantity, price and amount of the goods or services, is perfectly suitable.

A legal person can check the existence of a person’s entrepreneur account by searching for the Tax and Customs Board.

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. It is worth remembering that the minimum social tax rate will change at the turn of the year, and this will also change the minimum amount that must be received in the entrepreneur account in order to retain the right to health insurance.

The amounts required for health insurance that must be received in the entrepreneur account are listed on the website of the Tax and Customs Board.

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 the entrepreneur account has wrongly received the sum and it has been taxed with business income tax, the taxpayer must submit the following request via e-MTA (“Communication” - “Correspondence” - “Inquiries, Evidence, Requests” or “Claims, Obligations, Accounting”) stating that the amount received is not subject to business income tax. If necessary, you may also give in a request together with the evidence, to the Tax and Customs Board in writing. The Tax and Customs Board will then return wrongly paid tax amount to the taxpayer.

A legal person can mark a transaction in the accounting system as a purchase invoice. Suitable expense document is a bank account statement (payment order) or cash register of the entrepreneur account holder where the name, quantity, price and amount of the goods or services is indicated.

Yes, every amount received on the entrepreneur account is subject to income tax withholding. Also bear in mind that if you incur an indebtedness on the entrepreneur account, you will need not only to transfer enough funds to cover the indebtedness but also the taxes on the amount. Example: There is a 5-euro indebtedness. To pay this off, you will have to transfer 6.25 euros (5/0.8). Five euros will be used to cover the indebtedness, and 1.25 euro will be transferred to the Tax and Customs Board. For a refund of such tax payments that are not paid on actual business income, contact the Tax and Customs Board.

You can terminate the underlying agreement in the Internet bank, by selecting Information and Settings → Agreements → Entrepreneur Account → Close. Bear in mind that the bank account linked to the entrepreneur account will remain active and can continue to be used, as an ordinary bank account. If you would like to close this account as well, please send a corresponding request to info@lhv.ee. When you close your entrepreneur account, we will automatically send information to the Tax and Customs Board, which will remove the taxpayer’s data from the employment register. This is an important consideration if you plan on registering for unemployment.