14.02.2024
Thursday, 15 February, marks the start of the income tax return season. However, there is no need to hurry, as income can be declared until the end of April, and refunding of the income tax does not depend on the speed of submitting the tax return.
Once per year, all natural persons who are residents of Estonia must file an income tax return on their income for the previous year. An Estonian resident must declare all income received in Estonia and also from abroad, from contractual remuneration to envelope wages, lease and rental income, and income from investments. You can read more about this on the Tax and Customs Board website.
As a bank client, it pays to be attentive if you have a home loan or are engaged in investing. Details of your investment account and home loan interest should be forwarded from your Internet Bank to your income tax return before you start filing your return. This way, the necessary information will be immediately available on the return as pre-filled data.
To forward the LHV home loan interest rates to your income tax return, you should go to the ‘Loans and Leases’ section in your Internet Bank overview, then click ‘Information on Loan Interest to the ETCB’.
To forward your investment account data, you should go to the ‘Assets and Liabilities’ menu in your Internet Bank, click on ‘Investment Account Report’, tick all your investment accounts, click on ‘Send Request’ and then ‘Send to the ETCB’. If you do this, your LHV home loan interest data will automatically appear in Table 9.5 of your income tax return, and your investment account data in Table 6.5.
If you are engaged in investing, there are two options: to use the standard system, under which all securities transactions have to be declared, or use the investment account system that is more useful to the investor, under which only monetary contributions and disbursements from the account have to be declared. Income earned on the investment account is income tax-free until the moment of withdrawal. This means that an investor can defer paying income tax on current profits, reinvest this money, and pay the income tax only when they withdraw money from the account.
All sales made outside the investment account system and passive securities income (dividends and interest), as well as crypto income, are subject to income tax. When using a regular account, all dividends and interest received on securities (including interest on deposits) and profits from the sale of securities are taxable income by default, but these must also be reported on the income tax return.
To declare securities income earned on a regular account, you should use the ‘Tax Report’ under ‘Assets and Liabilities’ in the LHV Internet Bank to complete your income tax return. However, the good news is that in the coming weeks, LHV will enable the tax report to be sent automatically to the Tax and Customs Board in the standard system. Therefore, from this year onwards, patient users of the standard system will find it much easier to declare their income thanks to the automatic tax report.
For the most part, the income tax return is already pre-filled, but there are a few things worth paying attention to:
- If you use an investment account and have sold Baltic securities during the reporting period, then the relevant data will automatically be forwarded to your income tax return from Nasdaq, and you will need to delete these transactions from Tables 6.1 (Estonia) and 8.2 (Latvia and Lithuania) if you wish to defer income tax liability.
- If you have sold any real estate properties, then this information will come automatically from the Land Register. Check the information, if necessary, add the sold real estate and include the acquisition cost of the property and the documented costs of improvements.
- Make sure that the information on your declaration for trainings, donations, and III pillar contributions is correct, as your income tax will be refunded on account of these payments.
- In the case of spouses, it would be wise for the spouse with the lower annual income or the one with more deductible allowances to file their income tax return first. The system will automatically offer to transfer these, and the other spouse can then start with their tax return.
