Accounting & Tax for IT and SaaS Companies in Estonia

Monthly plan: each €49 payment is fully recognised in the month it covers. Annual plan: the €490 payment is recognised ratably at €490 ÷ 12 = €40.83 per month over the 12-month term. On the date of the annual payment, you record: DR Cash €490, CR Deferred Revenue €490. Each subsequent month: DR Deferred Revenue €40.83, CR Revenue €40.83. At month 12, the deferred revenue balance reaches zero and the full €490 has been recognised. The annual plan subscriber appears as €40.83/month in your MRR — not €490 — which correctly reflects the recurring value of that subscription.

It could be a significant problem, depending on how the working relationship actually functions. Poland (like most EU countries) looks at the substance of the working relationship, not the contract label. If the developers work exclusively for your company, follow your direction, use your systems and tools, and have no independent commercial risk, Polish social security (ZUS) and tax authorities are likely to reclassify them as employees regardless of the contractor invoice arrangement. If reclassified, you would owe back-assessed ZUS employer contributions, income tax withholding, and penalties from the start of the arrangement. Consider either (a) genuinely restructuring the relationship to ensure they meet independent contractor criteria, (b) engaging them through an EOR (Deel, Remote) who handles Polish employment, or (c) registering a Polish entity if the relationship is long-term and exclusive. Get a Polish employment law opinion before the situation escalates.

The free trial period generates no revenue — there is no consideration being exchanged. The contract does not begin until the customer makes a payment decision and the paid period starts. Under IFRS 15, you would identify the contract as beginning when the customer agrees to pay (typically at the start of the trial or on payment). If the trial is unconditional and the customer can cancel with no obligation, no revenue is recognised during the trial. Revenue recognition begins only when the first paid period starts. The trial period cost (server costs, support costs) is expensed as normal — it is a customer acquisition cost, not a cost of fulfilling a revenue contract.

The withholding tax is a foreign tax deducted at source on the royalty income your Estonian OÜ earned. Your accounts record the full gross royalty as revenue (not the net amount received), and the €50 (on a €1,000 royalty) withheld by the German payer is recorded as a foreign tax asset — specifically as a ‘prepaid tax’ or ‘tax credit receivable’. Under the Estonia-Germany double tax treaty, the WHT is reduced to 5–10% depending on the royalty type. When your Estonian OÜ later distributes dividends and the 20% dividend tax is applied, the WHT credit may be used to offset a portion of the Estonian tax liability — reducing the cash tax cost. Keep the German withholding tax certificates (Freistellungsbescheinigung or Bescheinigung) — EMTA requires documentary evidence for any foreign tax credit claimed.

Transferring IP from your Estonian OÜ to a foreign entity is a complex transaction with significant tax consequences. Estonia does not have an exit tax on IP transfers per se, but the transfer must be at arm’s length — the OÜ must receive fair market value for the IP being transferred. If the IP is transferred below market value to a related party, EMTA can assess the difference as a deemed distribution subject to 20% corporate income tax. The acquiring entity must pay the fair market value — or the OÜ must recognise the shortfall as a taxable distribution. Additionally, the OECD BEPS framework requires that IP transfers reflect real economic substance — a ‘paper’ IP transfer without transferring the people who develop and manage the IP is increasingly challenged by both Estonian and foreign tax authorities. Before undertaking any IP restructuring, obtain a transfer pricing valuation and a legal opinion covering both Estonian and the destination-country tax treatment.