The justifiable or deductible expenses are those that can be assigned to the company, that is, paid by the company and deducted as a business expense. Thanks to the innovative Estonian tax system, these expenses are exempt from taxes. They are considered money that gets reinvested in the company.
What is a deductible expense?
Basically, any expense related to your activity that does not trigger a permanent establishment in another country to prevent it from considering your company as a tax resident there. Let’s see some examples:
- The expenses of your servers and web: hosting, domains, and any other web service your business needs.
- Administrative tools and online or offline software for management, accounting, etc.
- Web tools, subscriptions and software you need to develop your activity.
- Fungible office supplies.
- Travel or public transportation for work, including flights, car rental, services such as Uber or Taxify, and accommodation, such as AirBnB. This includes trips to Estonia (to open your bank account, for example).
- Payment gateways fees, such as payment gateways for your online store or similar services.
- Work meals, but only for your client (s), not yours.
Examples of expenses that cannot be considered deductible include:
- Gas and petrol, and car trips within the same country. Traveling between countries to visit customers is deductible, but to avoid using your car for personal use, gas and petrol expenses within your country are excluded. Public transport is always deductible, however.
- Food, meals, lunch expenses.
- Holidays and pleasure trips, obviously. Be careful if you decide to “visit a customer” from December 24 to 26.
- Permanent office (more than 6 months a year). To prevent your home country (or any other country) from considering your company a tax resident there. It is not allowed to have an office or facilities more than 6 months a year.