Tax declaration

INTRODUCTION

The Rewear Company (TRC) pays 20% VAT from all its services and commission fees (the platform takes 50% of the lenders rental fee). Meaning the VAT is not paid from the lenders earnings as the rental fee is paid out in full by the renters to the lenders and the platform is not a rental service provider itself (§ 2 section 1 of the Value-Added Tax Act of the Republic of Estonia). Lenders are private persons, who sign up to use the platform's solution in order to rent out their own personal items. Lenders can earn a rental income on a realisation basis for as long as they want or untill their preloved items are suitable for rent or resale.

INCOME TAX

According to the Terms & Service, the lendler agrees to declare own income and pay taxes that are required to be paid from own earnings (Income Tax Act of the Republic of Estonia). 

Income from the resale of personal items such as your children's preloved clothes is not subject to income tax (Income Tax Act §15, p4) but any rental income is currently still a subject to income tax (Income Tax Act (§16 (1)).

TAX INCENTIVES

If the annual income of the private person is less than 6,000 euros, it is exempt from income tax. As well as, if the parent is raising 2 or more children, he/she has the right to deduct an additional tax-free income of 1848 euros from its income. If a child receives a taxable income then it's the parent's obligation to declare the child's income and the additional tax-free income is reduced by the child's income. Read more EMTA page!

DOING BUSINESS IS TAXABLE

If you rent out goods (as a permanent activity), start to manufacture or source clothes for the purpose of earning revenue then this act is considered as business and also taxable. Any permanent sales activity is considered as doing business because it's done for the purpose of obtaining income. So, if you're receiving a regular income you need to register yourself in the business register as a FIE or establish a business company (OÜ). Read more from the EMTA page!

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