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Estonia’s advantageous tax system brings companies to grow here

Dozens of companies, such as last year’s biggest investor HHLA have decided to invest in Estonia – at least in part – due to the country’s innovation-friendly and simple tax system.

Estonia is one of the few countries where there is no corporate income tax on retained and reinvested profits – meaning the money you use for innovating and a relatively low (14 – 20%) income tax on distributed profits. It is also one of the few countries where taxes can be declared fully online.

0% corporate income tax

This means that the tax system is particularly suitable for companies that are planning rapid international growth – you can spend the funds you would otherwise pay as taxes to the government, on innovating.

HHLA, for example, has stated in a recent issue of the Life in Estonia magazine that the main reason to invest here was the ease of doing business in Estonia – there is little bureaucracy and the taxation system is simple and advantageous.

‘One of HHLA’s targets is to grow internationally. Estonia is one of the fastest-growing economies in Europe and a pioneer when it comes to digitalisation. We are therefore pleased to integrate Transiidikeskuse AS, already a profitable and high-performing company, into the HHLA family,’ CEO of HHLA, Angela Titzrath said.

One of a kind system

The system of corporate earnings taxation in Estonia is truly one of a kind – it shifts the moment of corporate taxation from the moment of earning the profits to the moment of their distribution.

This means that earning profits in itself does not trigger income tax liability. The tax obligation arises only when earnings are distributed to shareholders. If the profit distributed to shareholders originates from dividends received from a subsidiary or permanent establishment in another country, then profit distribution is tax exempt. So, your business can earn millions of income without having to pay for it right away. Only when a company wants to distribute profits, it has to pay 14-20% income tax.

95% of taxes are filed online

Estonia has a simple and convenient electronic tax filing system – e-Tax, for both companies and individuals. Each year, around 95 per cent of all tax declarations in Estonia are filed electronically.

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 in Estonia here.

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