Which cross-border tax questions should you check?

What this check covers

Owning or running an Estonian company from another country can bring that company, or you, under the other country's tax rules. This check raises four concepts to take to a tax adviser or the official guidance where you live:

• Your personal tax residency: Tax residency is the country that treats you as a resident for income tax. It usually depends on where you live, where your home is and how many days you spend there. Dividends, board member fees or salary you receive from an Estonian company may be taxable where you are resident, as well as in Estonia.
• Place of effective management: Many countries treat a company as tax-resident where its key management and commercial decisions are actually made, wherever it is registered. If you run an Estonian company day to day from another country, that country may consider the company resident there too.
• Permanent establishment: A permanent establishment is a taxable presence of a company in another country, such as a fixed place of business or people who habitually act for it there. If the Estonian company has one in your country, profit linked to it may be taxable there. The Estonian Tax and Customs Board notes that an Estonian company managed by an e-resident from outside Estonia will probably have a permanent establishment abroad.
• Controlled foreign company (CFC) rules: Some countries tax their residents on profit kept in a foreign company they control, even before it is paid out. Whether the rules apply usually depends on ownership, the kind of income and how much tax the company pays where it is.

Your answers decide which concepts come first and why. The check never says a concept does not apply to you, and it never says where you will be taxed. Only the rules of the countries involved, applied to your facts, can answer that.

Start with your country's rules on tax residency. The OECD collects each country's tax residency rules, and EU residents can also use Your Europe.