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Expenses

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 rentals, 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 for more than 6 months a year.

The justifiable expenses of your company (that is, they make sense given the activity of your company) are tax free, because they are money that gets reinvested in the company. However, in order to deduct them in accounting, they must comply with a series of standards.

Specifically, we need that:

  • Have a justification. For example, for accommodation in Airbnb, that you go to work with a startup, or visit a client, or attend a conference, or spend a month studying culture for your blog, which is the source of your income.
  • Have documentary support, that is, an invoice or contract that justifies it. If it is an accommodation of AirBnB for example, a rental contract in the name of the company. In case of an invoice, it must have your company name, registration number, registered office, and VAT number (if you have one).
  • Are paid with the company’s card, or its bank account. As an exception, you can pay with out-of-pocket expenses if you can’t pay with your corporate accounts or cards.

Avoid paying any non-deductible expenses (such as food, a pair of jeans, or a holidays trip) with your corporate accounts or cards. Such expenses will need to be refunded from your personal finances back to the company’s funds later.

Ideally, we need at least the PDF document with the ticket payment confirmation that the airline sends you after the purchase, including the price. If possible, you should get an invoice in the name of the company. Some airlines allow this, some others don’t.

If you can’t get an invoice for your company for the flight tickets, that’s ok. Recently, the Tax Office stated that as a board member, if you can’t get invoices for the trips (flight tickets) in the name of your company, it’s ok if you can upload the purchase document for the tickets and the boarding passes.

Make sure to keep your boarding passes. Then you just need to upload them to the dashboard, we’ll take care of the rest. That’s also true for accommodation expenses such as Airbnb. We need at least a full receipt from AirBnB.

Usually, hotels can issue invoices for your company without any problem. Asking for it at the reception is normally enough. If not, most probably an invoice in your name is usually accepted.

We need you to upload all this information to the dashboard. Every month, we take all the invoices and bank statements of the previous month, and we do the accountancy based on them. To be able to do it in time, you must upload all the invoices and bank statements of one month before the 5th of the following month. That will give us enough time to do your accountancy correctly. As an example, for the accountancy of August, we need access to all the invoices and bank statements before the 5th of September.

With the invoices, flight tickets, boarding passes, accommodation invoices or receipts, and bank statements, we have everything we need to correctly do your accountancy.

As you may know, you can also, in the case of an emergency, pay with your personal card or even cash, and declare that as Out Of Pocket Expenses later.

Here is more information about invoicing and uploading the invoices in the dashboard.

  1. Log in to Companio and go to your purchase invoices.
  2. If you haven’t already, upload the purchase invoice.
  3. Next, you just need to click on the “Out of pocket” switch for that entry in the table of expenses.

Here you can find a step-by-step tutorial explaining how to declare out-of-pocket expenses.

Yes, it is, as long as your accommodation serves the goals of the company or is needed for its activity. This includes travel to attend conferences or meet with your startup team to work on a project.

You need to consider three things:

  1. The maximum time you can declare an accommodation in AirBnB (or any other place) outside Estonia as a deductible business expense is 6 months per year. This is because if you declare it for more than 6 months it would trigger a permanent establishment in that other country. Remember, maximum 6 months.
  2. You need the owner of the accommodation to make you a company contract in the name of your company in Estonia, with the name, registration number, and address of your company, where you clearly specify the price of the accommodation and its address.
  3. Don’t forget that we need AirBnB invoices or receipts for the amount paid.
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