Nowadays, no one is surprised that companies at any time need foreign employees who can provide their services cheaper and faster than local companies. That is why in recent years more and more electronic services have been ordered by Estonian companies from freelancers all over the world. How to properly deal with them, so that everything is done correctly and there are no additional tax requirements from Estonia?
Let's take a case study.
For example, an Estonian company wants to order the development of its site from a freelancer from Russia.
Which documents should be asked for by an accountant from the freelancer?
First of all, find out from the freelancer whether he provides services as a business owner or as an individual.
If the freelancer has his own company or he is self-employed
If the freelancer has his own company or he is self-employed, you are dealing with a business owner. In this case, you need to ask the freelancer to issue an invoice for his services, which you will need to upload to Nola Accounting along with all the expense documents for the previous month.
NB! If your company does not have a VAT number, when you make a purchase of electronic services from a foreign company, you have to register your company as a limited VAT taxable person. You have to pay 20% VAT to the Estonian budget. Or you can register yourself as a regular VAT taxable person, but for that you should have a turnover in Estonia in terms of the Value Added Tax Act.
If the freelancer works as an individual
If the freelancer works as an individual, it is better to make a contract with him. In the contract, it should be written out that all taxes on freelance income arising in the Russian Federation should be paid and declared by the freelancer. You can also ask for an invoice from the freelancer, which includes a paragraph that the freelancer has to pay taxes from the income by himself. Or you can invoice the freelancer by yourself, as some online casinos do, making payments to their advertising partners around the world.
The best form of payment for freelancers
The freelancer's invoice should be paid like any other invoice by your partners. For convenience, we recommend that you pay your freelancer's invoice from your bank account at WISE, as it allows you to transfer money directly to the freelancer's debit card.