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There is no corporate income tax on retained and reinvested profit. The corporate income tax rate is 22/78. Taxes can be declared fully online. Several useful grants and incentives available for foreign investors.
There is no corporate income tax on retained and reinvested profits.
This means that Estonian resident companies and the permanent establishments of foreign entities (including branches) are subject to 0% income tax for all reinvested and retained profits and a 22% income tax only for all distributed profits (both actual and deemed).
Distributed profits include:
A new fixed-term national security tax will be implemented in 2025 until the end of 2028.
The fixed-term security tax consists of three parts:
The tax base is the accounting profit of the previous financial year before income taxation. The tax is paid quarterly and in full in advance after submitting the annual report. This allows the tax burden to be spread and paid in installments. This tax does not apply if a company is not profitable.
Fringe benefits are taxable at the employer’s level. The employer pays income tax and social tax on fringe benefits.
Dividends paid to non-residents are no longer 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 otherwise provide.
As of 2019, 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.
Use our unique location attractiveness comparison tool to compare Estonia’s investment attractiveness to that of other European countries.
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. The annual cost per employee can be calculated here.
Information about using the electronic tax system can be found here.
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 40,000 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.
The Estonian standard VAT rate is 22%, but as of July 1, 2025, it will increase by 2%.
There is also a reduced 9% rate that applies to 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. The VAT rate for both physical and electronic press publications is 5% (from 1 August 2022).
Valid from 1 January 2025:
Accommodation services and accommodation services with breakfast are taxed at a 13% VAT rate (instead of the current 9%), and the VAT rate for press publications will rise from 5% to 9%.
The list of goods and services subject to a VAT rate of 0% can be found in the Value-Added Tax Act.
Overview of charging value-added tax.
Information about using the electronic tax system can be found here.
Residents pay taxes 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 based on law). 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 the calculator.
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:
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.
According to the Tax Foundation’s Tax Competitiveness Index, one of the advantages of Estonia’s tax system is how property taxes are handled. In the property taxes subindex, describing the government levies on the assets of an individual or business, Estonia scored the maximum possible score.
Land tax is a tax based on the taxable value of land as calculated by the Tax and Customs Board and it is paid in full to the budget of the local authority.
Land tax is not be imposed and a payment notice is not issued if the amount of tax is less than 5 euros. The Tax and Customs Board calculates land tax by 15 February at the latest.
Land tax rates range from 0.1 to 2% of the taxable value of land (not the actual market value of land). The taxable value is determined by the Land and Spatial Development Board during mass valuations.
The land under a home is generally exempted 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 subject to taxes.
More information can be found here.
Motor vehicle tax (also known as car tax) is a national tax paid by all owners or authorised users of motor vehicles registered in the motor register. The Tax and Customs Board will issue a tax notice for payment of motor vehicle tax to a person who is the owner or authorised user of a motor vehicle as at 1 January. The tax notice will be 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 (year), the obligation to pay motor vehicle tax also arises, but at a lower rate. In such a case, the tax will be calculated proportionally for the days remaining until the end of the current year and the tax notice will be issued within 15 working days after the registration of the vehicle in the motor register.
The amount of tax for each vehicle is individual. The tax on vehicles of different categories is based on different types of factors (for example, the tax on a vehicle of category M1 is formed on the basis of the base amount, CO2 component, and vehicle’s maximum mass). More information can be found from the web page of the Tax and Customs Board.
All natural and legal persons who have sold and purchased cutting right and/or timber are required to submit a notice concerning the cutting right or timber sold or purchased (forest transaction notice) to the Tax and Customs Board once a year. The notice of transactions of 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 immovable 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 of a natural person.
In Estonia, it is required to pay road user charge for all heavy goods vehicles that weigh over 3.5 tons and are used on the public road network.
Road user charge should be paid by the owner of the heavy goods vehicle. If the authorised user of the heavy goods vehicle has been entered in the traffic register, the authorised user is obligated to pay the road user charge. 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.
e-Tax is an electronic tax filing system set up by the Estonian Tax and Customs Board. Each year, around 98% of all tax declarations in Estonia are filed electronically.
The system enables you to:
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.
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.
