Tax residents of Estonia pay tax on their worldwide income, non-residents – on income from sources in Estonia.
The income tax rate is 20%.
Gains from the sale of assets are taxed at the ordinary tax rate. Profits from the sale of own dwelling are tax exempt.
Investment income is generally taxed at the ordinary tax rate. Under certain conditions, it is possible to reinvest the investment income tax-free.
Dividends from foreign companies are tax exempt if they are paid out of profits taxed with corporate income tax or if the dividends were taxed with withholding tax.
Tax is also paid on non-distributed profit of controlled foreign companies from low-tax jurisdictions.
The corporate income tax rate is 20%.
Corporate income tax does not arise until the moment of dividend distribution. From 01.01.2025, the rate of 22/78 applies to income received from the distribution of profits from commercial activities.
A foreign company is considered a controlled foreign company (CFC) if the Estonian company, directly or indirectly, solely or jointly with related parties, owns more than 50% of the capital, voting rights or rights to profit in it.
Estonian tax obligations arise if the CFC’s profit is generated by artificial arrangements aimed at tax evasion and the significant profit-generating functions are performed in Estonia.
CFC’s profit is exempt from Estonian tax if its accounting profit does not exceed EUR 750 000 and its passive income does not exceed EUR 75 000.
Dividend payments are exempt from withholding tax, except for certain dividend payments to individuals.
No withholding tax is levied on interest payments.
Payment of royalties is subject to 10% withholding tax.
The tax rate can be reduced under double tax treaties and EU directives.
The standard VAT rate is 24%.
Some goods and services are subject to the reduced rate of 9%.
Employers pay social security contributions at the rate of 33% of the employee remuneration (20% for pension insurance and 13% for health insurance). Employers also pay unemployment insurance contributions at the rate of 0,8%, employees at the rate of 1,6%.
Employees born in 1983 and later pay mandatory pension scheme contributions at the rate of 2%. Such contributions are voluntary for more senior employees.
Land tax is paid at the rates ranging from 0,1% to 2,5% depending on the municipality.
Some transactions are subject to minor stamp duties.
Estonia has 60 Double Tax Treaties (DTT) with the following jurisdictions:
60 DTTs: Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Korea (Republic of), Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Mexico, Moldova, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Vietnam.
Estonia signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral Convention entered into force for Estonia on May 1, 2021.
On October 29, 2014, Estonia signed the Multilateral Competent Authorities Agreement on Automatic Exchange of Financial Account Information under the Common Reporting Standard (CRS MCAA), under which Estonia receives information from its financial institutions and automatically exchanges this information with other jurisdictions on an annual basis. The automatic exchange began in September 2017.
In addition, on November 18, 2024, Estonia signed the Multilateral Agreement of Competent Authorities for the Automatic Exchange of Information under the Cryptoasset Reporting Framework (CARF-MCAA), which provides for the reporting of tax information on cryptoasset transactions on a standardized basis for the automatic exchange of such information.
Foreign exchange transactions can generally be made without restrictions.