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Taxation

There is no corporate income tax on retained and reinvested profits, 14-20% tax on distributed profits. Taxes can be declared fully online.

  • 0% tax on retained and reinvested profits
  • 14-20% tax on distributed profits
  • 95% of taxes declared online
  • 3 min to fill personal tax declaration

Corporate income tax

0%tax on retained and reinvested profits

There is no corporate income tax on retained and reinvested profits.

Estonian resident companies and the permanent establishments of foreign entities (including branches) are subject to 20% income tax only in respect to all distributed profits (both actual and deemed).

Distributed profits include:

  • corporate profits distributed in the tax period
  • gifts, donations and representation expenses
  • expenses and payments not related to business
  • transfer of the assets of the permanent establishment to its head office or to other companies

Starting from January 1, 2018 – the corporate income tax rate on regular profit distributions will be lowered from 20% to 14%, but only in cases where dividends are paid to legal persons.

Fringe benefits are taxable at the level of the employer. The employer pays income tax and social tax on fringe benefits.

14-20 %tax on distributed profits

Dividends paid to non-residents are no longer subject to withholding tax, irrespective of participation in the share capital of the distributing Estonian company. However, various withholding taxes may still apply to other payments to non-residents if they do not have a permanent establishment in Estonia or unless the tax treaties otherwise provide.

As the tax period for corporate entities is a month, income tax must be returned and paid monthly by the 10th day of the following month. You can read more about accounting requirements here.

Labour taxes

33%social tax

The rate of social tax is 33% (20% for social security and 13% for health insurance). Besides the social tax, unemployment insurance tax at a rate of 0.8% must be paid on the gross salary (an additional 1.6% is withheld from the employees’ salary).

Employers registered in Estonia (including the permanent establishments of foreign entities) must pay social tax on all payments made to employees, except on those specifically exempted by law. Fringe benefits and the income tax thereof are also included in the taxable base.

Information about using the electronic tax system can be found here.

Value added tax (VAT)

Standard VAT rate20%

The standard rate of VAT is 20%; the reduced rate is 9% and 0% in some cases.

VAT is charged on the supply of goods and services in the course of business activities and the self-supply of goods and services. A taxable person is an individual engaged in business and registered as a taxable person. The threshold for obligatory registration is 16,000 EUR. The threshold for a taxable person with limited liability in the case of the acquisition of goods is 10,000 EUR. There is no threshold in the case of the acquisition of services.

The taxable period is one calendar month, and VAT returns must be submitted to the tax authority by the 20th day of the month following the taxable period.

Information about using the electronic tax system can be found here.

Personal income tax

20%personal income tax rate for 2017

Residents pay tax on their worldwide income. Taxable income includes, in particular, income from employment (salaries, wages, bonuses and other remuneration); business income; interest, royalties, rental income; capital gains; pensions and scholarships (except scholarships financed from the state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.

non-taxable amount for 20172,160€

The personal income tax is withheld from the employees’ gross salary every month and paid by the employer.

Non-residents pay personal income tax only on their income received from Estonian sources. Taxable income in Estonia includes:

  • income from work under a labour contract or contractor’s agreement in Estonia
  • income from business carried out in Estonia
  • interest income received from Estonia (only if it is substantially higher than that of similar debt claims)
  • royalties
  • income from the lease of assets located in Estonia
  • gains from disposal of assets located in Estonia
  • directors’ fees paid by Estonian enterprises; » income of a sportsman or an artist from his or her activities in Estonia
  • pensions and scholarships

Personal income tax declarations need to be filed once a year. Using a secure ID, a taxpayer logs onto the e-Tax system, reviews the data in pre-filled forms, makes any necessary changes, and approves the declaration form. The process typically takes three to five minutes. Even one-click tax returns are possible.

e-Tax system

95%of taxes declared online

e-Tax is an electronic tax filing system set up by the Estonian Tax and Customs Board. Each year, around 95 per cent of all tax declarations in Estonia are filed electronically.

The system enables you to:

  • file an enterprise’s declarations for income tax, social tax, unemployment insurance and contributions to the mandatory pension fund
  • request value-added tax returns
  • request alcohol excise, tobacco excise, fuel excise and packaging excise duty returns
  • file customs declarations
  • file personal income tax declarations

Non-residents can choose a tax representative. The tax representative of a non-resident is a person to whom the Tax and Customs Board has issued a corresponding activity license authorised to represent the non-resident for the performance of obligations arising in Estonia. You can read more about accounting requirements here.

Taxation

Here are some useful links regarding taxation:

You are also welcome to send us an enquiry for more specific information.

Doing business in Estonia

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What is it like to run a business in Estonia? How to benefit from the e-solutions and the efficiency of our business culture? What are the opportunities in specific sectors?

The Business in Estonia section helps you prepare for doing business in Estonia. And if you have any further questions, our business advisers are happy to help.

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