Taxation in Estonia
Estonia currently has one of the most competitive and transparent taxations systems in Europe. By taxing corporate profits only at their distribution, the Estonian tax system encourages investments and gives entrepreneurs more flexibility in planning their cash-flow and future development. In case you have more detailed questions, please feel free to contact us anytime.
Income Tax
The income tax rate for private entrepreneurs and corporations is 20%.
Corporate earnings taxation in Estonia shifts the moment of corporate taxation from the moment of earning the profits to the moment of their distribution. This means that earning profit 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, there’ll be no tax to pay on profit distribution.
Dividend Payments
Since 2019, 7% is withheld from dividend payment made to natural person, both resident and non-resident, if the payer applied reduced corporate income tax rate of 14/86 to the dividend payment. Corporate income tax rate in Estonia for distribution in the year 2019 is 20/80 and distribution up to the taxable average amount of 3 previous years - 14/86 of the net amount.
VALue added tax (VAT)
The value added tax (VAT) rate in Estonia is 20%. Within EU Most goods and services are taxed at 20%. VAT is always included within the price. There’s also a reduced VAT rate of 9%. Some goods – like books, for example – are taxed at the rate of 9%.
Social Tax and Employment
Social tax is paid by employer in full and a general rate is 33% in 2019 of the gross payment.
There is always a minimum obligation for social tax to be paid, in 2019, it is 165 EUR, even if there were no payments for salaried work for each employe
In 2019, an unemployment insurance premium to be withheld is 1,6% of the gross salary of an employee. In addition to this, employers pay the unemployment insurance premium at a rate of 0,8% of the amount of gross salaries monthly.
Taxation of non-residents
Non-residents (natural and legal persons) have a limited tax liability in Estonia; only the Estonian-source income is taxed in Estonia. Employers, who grant taxable fringe benefits, included employers who are natural persons and non-residents having a permanent establishment or operate as employers in Estonia pay income tax on fringe benefits.
A non-resident legal person which has a permanent establishment in Estonia has to pay income tax imposed on fringe benefits, gifts, donations and costs of entertaining guests, profit distributions, and expenses and payments not related to business made by a non-resident through a permanent establishment.
Taxation and main declarations
Taxation period in Estonia is one month, TSD declaration (Declaration of income and social tax, unemployment insurance premiums and contributions to mandatory funded pension)
should be submitted by the 10th date of next month and VAT (Value added Tax) and VD (report of intra-Community supply within EU) declarations deadline is 20th date of next month (for example accounting documents by August will be declared in Sept).