The change is expected to take effect next year, pending the Riigikogu's approval of the legislative amendment, which will reduce the higher income tax rate of the entrepreneur account from 40 percent to 20 percent.

"This change could certainly encourage the opening of entrepreneur accounts, as it makes the instrument's use even easier and allows for more reasonable taxation with higher incomes. Additionally, there is a positive change concerning taxation when providing services to a business entity," LHV's head of digital banking Margus Holland told ERR.

The tax obligation for business entities purchasing services from entrepreneur account owners will also change.

According to Holland, among LHV entrepreneur account users are Bolt and Wolt couriers, for whom it is a convenient alternative to establishing their own business.

Entrepreneur accounts are also preferred by service providers with low business expenses, such as specialists offering consultations.

Under the current law, the tax rate is 20 percent for annual incomes up to €25,000, and a 40 percent tax rate applies to incomes between €25,000 and €40,000.

Starting January 2025, entrepreneur account owners with annual incomes up to €40,000 will be subject to a 20 percent tax rate.

Approximately €4 million worth of transactions are conducted through entrepreneur accounts each month. In 2023, entrepreneur accounts generated about €7.7 million in tax revenue.

LHV is currently the only bank offering the entrepreneur account service.

According to LHV, as of the end of May, there were nearly 24,100 entrepreneur account users, and the number of accounts shows a growth trend. Approximately 700 new entrepreneur account users are added each month.

"The entrepreneur account was primarily created to allow individuals to conveniently declare transactions between private individuals, but it is also possible to provide services or sell goods to companies," Holland noted.

The government's goal is to simplify taxation for novice entrepreneurs and businesses. With an entrepreneur account, the tax burden is lower, especially under the revised law.

"In our view, the entrepreneur account is clearly an innovative product; we cannot comment on the positions of other banks in detail," said LHV's digital banking director.

The entrepreneur account is a light-on-bureaucracy and affordable way for private persons to act as an entrepreneur, with financial reports, monthly tax returns and paying taxes all done automatically based on the entries on the entrepreneur account. 

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