This issue of InfoCourier covers the following topics:

  • Summaries of Court judgments: Tax residency cannot be determined solely based on the population register data

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Court judgements

Tax residency cannot be determined solely based on the population register data

Tallinn Administrative Court recently examined a situation where the tax authority had established that an individual could not be treated as a tax resident ofin Estonia on the grounds that according to the Estonian Population Register the person’s place of residence was in Finland.

The tax authority relied mainly on § 66 (1) of the Population Register Act, which states that if the performance of public duties is related to residence, it shall be based on the residential address in the population register.

The court however found that in cases where a person’s residence is not clearly and unambiguously identifiable, other factors besides the address recorded in the population register should be considered as well. For example, when a person’s place of residence is not clearly identified as being in Estonia but they spend at least 183 days there over a period of 12 consecutive calendar months, the person may be treated as an Estonian tax resident for the purposes of the Income Tax Act. Likewise, in accordance with the tax treaty signed between Estonia and Finland, a person is deemed to be a resident of the state in which they have their “centre of vital interests” or where they spend more time.

The court pointed out that despite § 66 (1) of the Population Register Act, § 65 (2) of the same act provides that if a person uses several addresses as their permanent or primary residence, they may submit all such addresses for entry in the population register and select one of them as “the residential address with legal effect”, while the others are recorded as additional addresses. Based on an extract from the population register, the claimant had indicated Estonia as their additional address during the period at issue.

The court agreed that the claim was substantiated as the tax authority had attached too much weight to the address registered in the population register.

The report of the case is available here (in Estonian).

Additional information: Tax Advisor Einar