Estonia tax system - taxation of Estonian companies and individuals: VAT, income tax and capital gains. Tax treaties of Estonia.
Basic taxes (briefly)
|Corporate tax (in detail)||Income tax rate is 20%|
|Capital gains tax. Details|
|VAT. Details||The standard VAT rate is 20%. A reduced rate of 9% applies to certain goods and services|
|Other taxes||Social contributions, Land tax|
|Stamp duty||0.1-2.5% (real estate transactions)|
International tax agreement
|Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Нungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Mexico, Moldova (Republic of), Netherlands, Norway, Poland, Portugal, Romania, Serbia, Singapore, Slovakia, Slovenia, South-Korea, Spain, Sweden, Switzerland, Thailand, Turkey, Turkmenistan, Viet Namм, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan|
Personal Income Tax
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.
Dividends paid out of profits of an Estonian company that have been taxed at 14% are subject to personal income tax at the rate of 7% (withheld by the Estonian company). If an Estonian company has paid corporate income tax at the rate of 20%, no personal income tax is charged on the dividends.
Tax is also paid on non-distributed profit of controlled foreign companies from low-tax jurisdictions.
Corporate Income Tax
The corporate income tax rate is 20%.
No corporate income tax is paid until dividends are distributed. For this purpose, deemed distribution of dividends includes non-business expenses, transfer pricing adjustments, gifts, etc.
The corporate income tax rate is reduced to 14% for companies that regularly distribute dividends (the payment of dividends does not exceed the average amount of dividends for the previous three years). In this case, dividend payments to individuals are subject to 7% personal income tax.
Dividends received from Estonian companies and companies from EU/EEA countries and Switzerland are exempt from tax, provided that the participation is at least 10%.
Dividends received from other countries (excluding tax havens) are also exempt from tax provided that the participation is at least 10% and the profit from which the dividends are paid was taxed with corporate income tax or the dividends were taxed with withholding tax.
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 20%.
Some goods and services are subject to the reduced rate of 9%.
Social Security Contributions
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.
International tax treaties
Estonia has 61 Double Tax Treaties (DTC) with the following jurisdictions:
60 DTCs: Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Jersey, Kazakhstan, Korea (Republic of), Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Moldova (Republic of), Morocco, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Vietnam.
Estonia has also 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.
Foreign exchange transactions can generally be made without restrictions.
Taxes of Estonia
|Min. rate for corporate tax||20%|
|Capital gains tax||Regular rate|