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Estonia has the best tax system in the world. In a nutshell—no corporate income tax on retained and reinvested profits, more freedom to build your business.
Estonia has no corporate income tax on retained and reinvested profits.
Resident companies and the permanent establishments of foreign entities (including branches) pay 0% income tax on all reinvested and retained profits, and 22% income tax only on all distributed profits (both actual and deemed).
Distributed profits include:
The employer pays income tax and social tax on fringe benefits.
Dividends paid to non-residents are not subject to withholding tax, irrespective of participation in the share capital of the Estonian company that distributes them. However, 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 say otherwise.
The tax period for corporate entities is a month. Income tax must be returned and paid by the 10th day of the following month. You can read more about accounting requirements here.
The social tax rate is 33% (20% for social security and 13% for health insurance). Unemployment insurance tax (0.8%) must be paid on the gross salary. An additional 1.6% is withheld from the salary.
All employers registered in Estonia, including permanent establishments of foreign entities, pay social tax on all payments made to employees, except on those specifically exempted by law. Fringe benefits are also included in the taxable base.
The annual cost per employee can be calculated here, and information about using the electronic tax system can be found here.
If your company’s taxable annual turnover is more than 40,000 euros, you must register the company as a VAT payer. 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 for 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.
The standard VAT rate is 24% as of July 1, 2025.
Certain goods and services, including books, teaching/learning materials, newspapers and magazines (also online editions), accommodation services, medicines and medical equipment, sanitary and toiletry products, and press publications, are subject to a reduced 9% rate.
Accommodation services and accommodation services with breakfast are taxed at a 13% VAT rate.
The list of goods and services subject to a VAT rate of 0% can be found in the Value-Added Tax Act.
Here’s an overview of charging value-added tax. Everything you need to know about the electronic tax system can be found here.
Estonian residents pay taxes on their worldwide income. Taxable income includes
Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed. The amount of annual tax-free income can be calculated using this calculator (not yet available in English).
Personal income tax is withheld from the employees’ monthly gross salary and paid by the employer. Non-residents pay personal income tax only on income received from Estonian sources. Taxable income in Estonia includes:
Personal income tax declarations need to be filed once a year. Using a secure ID, log into the e-Tax system, review the data in pre-filled forms, make any necessary changes, and approve the declaration form. The process typically takes three to five minutes. Even one-click tax returns are not unheard of!
According to the Tax Foundation’s Tax Competitiveness Index, property taxes are one of the Estonian tax system’s main strengths.
Land tax is based on the taxable value of land as calculated by the Tax and Customs Board and is paid in full to your local authority.
Land tax is not imposed, and a payment notice is not issued if the amount is less than 5 euros. The Tax and Customs Board calculates land tax by 15 February.
Land tax rates range from 0.1 to 2% of the taxable value of land (not the actual market value). The taxable value is determined by the Land and Spatial Development Board during mass valuations.
The land under a home is generally exempt from land tax. There is no property tax (i.e. tax on the value of buildings). Property transfers are generally subject to state and notary fees but not to taxes.
More information can be found here.
Motor vehicle tax (also called car tax) is a national tax paid by all owners or authorised users of registered motor vehicles.
Tax notices are issued by 15 February at the latest.
If a vehicle is registered in the Estonian motor register for the first time during a taxable period, the tax rate is lower, calculated proportionally for the days remaining until the end of the current year. The tax notice will be issued within 15 working days after the vehicle is registered.
Vehicles of different categories are taxed based on different factors (for example, the tax on a vehicle of category M1 is based on the base amount, CO2 component, and vehicle’s maximum mass).
For more on this, check the website of the Tax and Customs Board.
Anyone selling and purchasing cutting rights and/or timber is required to submit a notice to the Tax and Customs Board once a year.
The notice of transactions for the previous year must be submitted by 10 January. Without submitting a forest notification, the forest owner may cut up to 20 solid cubic metres of wood per year. Even if less than 20 cubic metres of timber has been sold per year, income from the sale of timber must still be declared in the income tax return.
Road user charges are required for all heavy goods vehicles weighing over 3.5 tons and are used on the public road network. Road user charges should be paid by the owner or authorised user of the vehicle. The rate depends on the maximum authorised mass of the heavy goods vehicle and its trailer, the number of axles, and the emission class of the heavy goods vehicle.
Around 98% of all tax declarations in Estonia are filed electronically.
e-Tax is an electronic tax filing system that enables you to:
Non-residents can choose a tax representative to represent them in Estonian tax matters.
Read more about accounting requirements here.
Here are some useful links regarding taxation:
You are also welcome to send us an enquiry for more specific information.
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? Who to partner up with?
The Estonian Investment Agency’s team is happy to help you via its complimentary e-Consulting service, organize online or offline follow-up events such as virtual investment visits and guide you through the fairly simple process of investing in Estonia.
