Banks & Finances Estonia

In Estonia, the banking system is characterized by a high level of digitization and openness to foreign clients. Many banks offer services to non-residents, although conditions and requirements may vary; you need to prove your connection to Estonia.

Main banks friendly to foreigners

Swedbank: One of the largest banks in Estonia, providing a wide range of services for individuals and businesses.

SEB Pank: Offers a variety of banking products and services.

LHV Pank: An Estonian bank focused on digital services.

Luminor Bank: Provides services to both residents and non-residents.

Alternative options

If proving a connection to Estonia is difficult, you can consider using digital banks or fintech platforms like Wise or Revolut, which offer multi-currency accounts and do not require a local address.

Proof of connection to Estonia:

Banks require proof of your connection to Estonia, which may include:

Residency: Housing rental agreement or proof of property ownership.

Work: Employment contract with an Estonian employer.

Study: Enrollment certificate from an educational institution.

Family ties: Documents proving close relatives in Estonia (spouse, children, parents).

Required documents

- Personal identification: Valid passport or ID card.

- Residence permit: For citizens outside the European Economic Area and Switzerland, a valid Estonian residence permit or right of residence is required.

- Additional documents: Proof of connection to Estonia, as mentioned above.

Account opening process

Personal visit: Many banks require a personal visit for identification and signing necessary documents.

Online opening: Some banks offer the possibility to start the process online, but completion usually requires personal presence.

Account opening costs

Estonian residents: Account opening is generally free or with a minimal fee.

Non-residents: A fee may be charged for document review and account opening. For example, at Swedbank, the fee for non-residents with a residence permit of less than 12 months is 200 euros.

Recommendations

Contact the chosen bank: Before visiting, verify the current requirements and procedures as they may change.

Prepare documents in advance: Ensure that you have all the necessary documents to expedite the process.

Consider processing times: The process may take from a few days to several weeks depending on the bank and your status.

Using ATMs

Estonia has ATMs from various banks, including Swedbank, SEB, LHV, and Coop Pank. Most of them accept cards from international payment systems such as Visa, Mastercard, and UnionPay. Using a foreign card in Estonian ATMs usually does not incur additional fees from the Estonian bank. However, your home bank may apply its own fees for international transactions.

Your bank's fees: It is recommended to clarify the service conditions with your bank in advance to avoid unexpected costs.

Withdrawal limits: ATMs in Estonia typically have daily cash withdrawal limits, for example, up to 3500 euros per day. However, your bank may set its own limits on withdrawal amounts abroad. Check these limits before traveling.

Currency choice when withdrawing: When withdrawing cash, the ATM may offer a choice between converting currency at your bank's rate or at the acquirer bank's rate. It is usually more advantageous to choose the option without automatic conversion (i.e., in local currency—euros) to avoid additional expenses.

Safety and recommendations

ATM check: Use ATMs located in safe and well-lit areas, preferably inside bank branches or shopping centers.

Notify the bank: Inform your bank about your planned trip to avoid card blocking due to suspicious activity.

Balance control: Regularly check your balance and card transactions to promptly detect any unauthorized operations.

Alternative Ways to Get Cash

Some Coop network stores in Estonia offer the "Coop Sula" service, allowing you to withdraw cash when making card purchases. However, this service may only be available for cards issued by Estonian banks.

Additional Tips

Using Multi-currency Cards: Consider using multi-currency cards that offer better terms for withdrawing cash abroad.

Bank Transfers (SWIFT)

Estonian banks such as SEB, Swedbank, and LHV offer international transfer services via the SWIFT system. To make such a transfer, the following information is required:

- Recipient's first and last name.

- Recipient's account number in IBAN format.

- Recipient bank's BIC/SWIFT code.

- Recipient bank's address (in some cases).

Fees and Timeframes

SEB: The fee for an international payment is 5 euros when using electronic channels. The money usually reaches the recipient's account within 1-3 business days.

Swedbank: The fee for an international payment depends on the type of payment selected and can range from 5 to 32 euros. The timeframe for crediting funds depends on the currency and destination country.

LHV: The fee for an international payment is 5 euros for standard payments. The timeframe for crediting funds depends on the currency and destination country.

Payment Systems (Western Union, MoneyGram)

International payment systems allow you to send money either in cash or to the recipient's bank account. In Estonia, Western Union services are available through various service points.

Sending process:

Western Union: You can send money online through the website or visit a service point. To send money, you need to provide the recipient's details and pay for the transfer. The recipient can receive the money in cash or to a bank account depending on the chosen method.

MoneyGram: Services are available through partner offices. The process is similar to Western Union: you need to provide the recipient's details and pay for the transfer. The recipient can receive the money in cash or to a bank account.

Fees and Timeframes

Western Union: The fee depends on the amount of the transfer and the destination country. The money is usually available for pickup within a few minutes.

MoneyGram: Fees and timeframes are similar to Western Union but may vary depending on the destination and amount.

Fintech Platforms (Wise, Revolut)

Modern online platforms offer competitive conditions for international transfers with transparent fees and competitive exchange rates.

Sending process:

Wise: You need to register on the platform, specify the transfer amount and currency, provide recipient details and make the payment. The transfer is made at the interbank rate with a transparent fee.

Revolut: After registration and topping up your account, you can send money to various countries. Transfers within the set limit can be free of charge; currency exchange occurs at the interbank rate.

Fees and Timeframes

Wise: The fee depends on the amount and currency of the transfer, usually a small percentage of the amount. The money reaches the recipient's account within 1-2 business days.

Revolut: Transfers within the monthly limit are free; exceeding the limit incurs a small fee. The timeframe for crediting funds depends on the currency and destination country.

Foreign citizens in Estonia have the opportunity to obtain loans, including mortgages, under certain conditions set by local banks.

Borrower Requirements

Residence Permit: Most Estonian banks require the borrower to have a valid residence permit in Estonia. This confirms legal stay and connection with the country.

Income: Stable and verifiable income is required.

Credit History: Having a positive credit history, both in Estonia and in the country of origin, increases the chances of loan approval.

Loan Conditions

Down Payment: Banks usually require a down payment of at least 15% of the property's value. When using the guarantees of the Estonian Enterprise and Innovation Agency, the amount of self-financing can be reduced.

Loan Term: The maximum term for a mortgage loan in Estonia is up to 30 years.

Interest Rate: Interest rates depend on the conditions of a particular bank and can be fixed or linked to Euribor with the addition of the bank's margin.

Required Documents

Identity Document: Valid passport or ID card.

Income Verification: Income statements, employment contract, or other documents proving stable income.

Residence Permit: Document confirming the right to reside in Estonia.

Additional Documents: Depending on the bank's requirements, additional documents confirming financial status and obligations may be required.

Features for Non-residents

Some banks may offer loans to non-residents, but the conditions may be stricter, and interest rates higher.

Recommendations:

Consult with Experts: Contact financial consultants or lawyers specializing in real estate for professional assistance.

Real Estate Purchase

Cashless Payment: In Estonia, it is customary to pay for real estate via bank transfers. Typically, funds are transferred to a notary's escrow account, ensuring transaction security. The notary acts as a guarantor for the transfer of funds and returns the money in case the deal is canceled.

Cash Payment: Although the law does not prohibit the use of cash when purchasing real estate, such transactions are rare in practice and carry risks. For amounts over 10,000 euros, cash declaration is required, complicating the process. Additionally, some banks and sellers may refuse to accept large cash amounts due to security concerns and anti-money laundering measures.

Car Purchase

Cashless Payment: Purchasing a car is usually done through a cashless bank transfer. This ensures transaction transparency and is the preferred payment method.

Cash Payment: Cash payment is possible, especially when buying a used car from a private individual. However, it is recommended to conduct such transactions with special caution, entering into a written sales contract and, if possible, making payment via bank transfer to track the transaction. A cash deal does not necessarily mean fraud, but certainly increases the risks.

Limits on Cash Use

Limits: Currently, there are no strict legislative restrictions on the amount of cash payments in Estonia. However, the European Commission recommends setting a limit of 10,000 euros for cash transactions, and such measures may be introduced in the future.

Recommendations

Before making a large purchase, consult a notary or legal consultant for detailed information about the procedures and requirements.

Savings Products

Fixed-term Deposits: Offer a fixed interest rate for a specified term, usually from 1 month to 3 years. During this period, funds are unavailable for withdrawal without loss of interest. Rates depend on the deposit's term and amount.

Savings Accounts: Provide flexibility in fund management with the ability to deposit and withdraw without restrictions. Interest rates are usually lower than on fixed-term deposits, but allow access to money at any time.

Pension Savings

Second Pension Pillar: Mandatory savings system where part of your income is automatically deducted into a pension account. Savings are invested in various funds, and you can choose a fund that suits you.

Third Pension Pillar: Voluntary contributions that you can make independently to increase your future pension. The state provides tax incentives on contributions to the third pillar, making this savings method attractive.

Investment Opportunities

Investment Funds: Allow you to invest in a diversified portfolio of stocks, bonds, and other assets. For example, Swedbank Robur funds offer various options with different levels of risk and potential returns.

Stocks and Bonds: Through brokerage accounts, you can directly purchase company stocks or bonds. This requires a deeper understanding of the market and readiness for risks associated with price fluctuations.

Robo-advisors: Automated platforms that help invest based on your goals and acceptable risk level. They offer simple solutions for beginner investors with minimal investments.

Real Estate

Investing in real estate remains a popular way to preserve and grow capital. Purchasing additional property for rental or future resale can provide stable income and protection against inflation.

Recommendations

Consult with professionals: Seek guidance from financial advisors for personalized recommendations when necessary.

Tax obligations for foreigners in Estonia depend on their tax residency status and sources of income.

Determining tax residency

Estonian resident: An individual is considered a resident if they have a place of residence in Estonia or stay in the country for at least 183 days during 12 consecutive months.

Non-resident of Estonia: A person who does not meet the above criteria is considered a non-resident and is taxed only on income sourced from Estonia.

Income taxation

Residents: Required to declare and pay taxes on global income, including income earned abroad. Double taxation prevention agreements entered into by Estonia with other countries are applied to avoid double taxation.

Non-residents: Taxed only on income earned in Estonia, such as wages, rental income, dividends, and others. The income tax rate for non-residents is 20%.

Social contributions

Residents: Required to pay social tax on income earned in Estonia.

Non-residents: The obligation to pay social contributions depends on the nature of work and agreements between Estonia and the country of residency.

Tax benefits and deductions

Residents: Entitled to standard tax deductions and benefits as provided by Estonian legislation.

Non-residents: May be eligible for certain deductions if they are residents of an EEA member state and provide supporting documents.

Careful study of the law and consultation with professionals will help ensure compliance with all requirements and optimize tax burden.

Tax declaration for foreigners in Estonia depends on their residency status and sources of income.

 Determining residency status: Estonian Resident / Non-resident of Estonia.

To determine your status, it is recommended to submit an application to the Estonian Tax and Customs Board.

Declaration obligations for residents

Residents are required to submit information on their income earned both in Estonia and abroad (wages, business income, rental, property sales or dividends). If all income was taxed at the source (for example, through an employer in Estonia), submission of a declaration is not mandatory.

The annual declaration must be submitted by April 30 of the year following the reporting year. If a tax underpayment is revealed after submission, it must be paid by October 1. If you have overpaid taxes, the refund is usually processed within 5 working days after submission of the declaration.

How to submit a declaration

Electronic system e-MTA: Residents are provided access to the electronic portal of the Tax and Customs Board (e-MTA), which automatically fills in income data provided by employers, banks, and other organizations.

Alternative methods: If you don't have access to e-MTA, the declaration can be submitted in paper form at the office of the Tax and Customs Board.

 

Declaration obligations for non-residents

Non-residents are required to submit a tax declaration in Estonia in the following cases:

Income from business activity: If a non-resident is registered in Estonia as an individual entrepreneur, they must submit an income declaration even if no income was earned.

Income from the disposal of assets: If a non-resident has profited from the sale of assets located in Estonia.

Change of non-taxable income: If too much non-taxable income was considered when paying the income, in this case, it is necessary to pay income tax based on your income declaration.

In other cases, income tax is usually withheld by the person making the payment.

Declaration submission deadlines: Income declarations for the previous year must be submitted by April 30 of the current year. Income tax payment must be made by October 1 of the declaration submission year.

Declaration submission process

Obtaining a registration code: To declare income, a non-resident must have an Estonian registration code, such as a personal code or a taxpayer registration code.

Using the e-MTA electronic environment: The Tax and Customs Board provides a convenient electronic environment for submitting declarations. Access requires an Estonian ID card, Mobile-ID, Smart-ID, or a secure digital identity card of a European Union state.

Recommendations

Contact tax consultants or the Tax and Customs Board for detailed information corresponding to your situation.

In Estonia, self-employed persons and freelancers acting as sole proprietors must comply with certain rules and can take advantage of several benefits.

Business activity registration

Mandatory registration: Before starting activity, a sole proprietor must register in the Estonian Commercial Register.

Tax obligations

Income tax: Income is subject to income tax at a rate of 20%. The tax is calculated based on net profit, which is the difference between income and expenses related to business activities.

Social tax: A sole proprietor is obliged to pay social tax, which covers pension and health insurance financing. The social tax rate is 33% of the taxable base.

Turnover tax (VAT): If the annual turnover of a sole proprietor exceeds 40,000 euros, it is necessary to register as a VAT payer and pay VAT.

Income declaration

A sole proprietor is obliged to annually submit an income declaration using form E. The declaration must be submitted by April 30 of the year following the reporting year.

Benefits and deductions

Non-taxable income: A sole proprietor is entitled to a standard non-taxable income, the amount of which depends on the total annual income.

Expense deduction: Expenses directly related to business activities (e.g., office rent, equipment, professional training) can be deducted from taxable income, reducing the tax burden.

Entrepreneurial account

Simplified taxation system: To facilitate tax administration, a sole proprietor can use an entrepreneurial account. Receipts to this account are automatically taxed, which is distributed between income and social taxes, as well as contributions to the funded pension (if applicable).

Social guarantees

Pension and health insurance: Payment of social tax entitles a sole proprietor to state pension provision and health insurance.

Liability and penalties

Non-compliance with obligations: Failure to fulfill tax and registration obligations may result in fines and other sanctions.

Recommendations

It is recommended to consult tax advisors or the Estonian Tax and Customs Board for detailed information corresponding to your specific situation.