Estonia
Corporate taxes and other direct taxes
Income derived by a resident company is not taxed if retained. Upon distribution, CIT is levied at a rate of 20/80 (25%) of the net amount of the profit distribution, corresponding to 20% on the gross amount (distribution + CIT) of the distribution.
Dividends distributed in an amount lower than or equal to the amount of the average of distributed dividends in the preceding 3 years, on which income tax has been paid by the resident taxpayer, are taxed at a rate of 14/86. If dividends are paid to individuals, whether resident or non-resident, and the distributing company has paid the lower 14/86 rate or operates under the tonnage tax regime, an additional 7% withholding tax is imposed on the individual recipient, unless a lower rate applies under a tax treaty. However, no withholding tax is applied if the recipient is a company. Since 2018, resident credit institutions and Estonian branches of non-resident credit institutions are required to make quarterly advance payments of income tax on the previous quarter's profit, at a rate of 14%. These advance payments can be taken into consideration when distributing profits and calculating income tax liability. From July 1, 2020, qualifying resident shipping companies have the option to apply the tonnage tax regime to income earned from qualifying international shipping activities, with a tax rate of 20%. From 2025 onwards, the income tax rate will be 22/78, and the reduced rate of 14/86 will be eliminated.
The following payments are subject to withholding tax (unless tax treaty restricts or reduces the rate):
1) 7% withholding tax applies to dividend payments made to resident or non-resident individuals (applies to dividends taxed at a lower tax rate).
2) Royalties (including payments for the use of industrial, commercial, or scientific equipment) paid to non-residents are generally subject to 10% withholding tax under domestic law.
3) 20% on rental payments to non-residents for the use of immovable property located in Estonia, and movable property subject to registration in Estonia.
4) Interest, royalties, and rental payments to resident individuals.
5) 10% on payments to non-resident companies for services provided in Estonia.
6) Salaries, directors’ fees, and service fees paid to individuals.
7) 10% on payments for the activities of non-resident artists or athletes carried out in Estonia.
8) Certain pensions, insurance benefits, scholarships, prizes, lottery winnings, alimony, etc. paid to non-residents and resident individuals.
Level of attention paid by Tax Authority:
VAT and other indirect taxes
VAT applies to the supply of goods and services performed by a taxable person in the course of their business activities in Estonia.
A taxable person is one who is engaged in business, that is, independent economic activity in the course of which goods or services are supplied, and is registered or required to register for VAT.
The standard 20% rate applies to the supply of all goods and services not qualifying for the reduced rate of 9% or exemption. A reduced rate applies to accommodation, books, certain periodicals, listed pharmaceutical products, and medical devices. The VAT rate on the export of goods, and the intra-Community supply of goods and certain services is 0% (i.e. exemption with credit).
VAT and all other taxes are administered by the Estonian Tax and Customs Board (www.emta.ee). The following transactions are subject to Estonian VAT:
1) The supply of goods and provision of services with a place of supply in Estonia;
2) The import of goods into Estonia;
3) Intra-Community acquisition of goods in Estonia;
4) The supply of goods or services specified in the Estonian VAT Act, providing the taxable person has opted for taxation thereof. Certain forms of supply are subject to a 0% rate (i.e. exemption with credit or zero-rating), including, but not limited to:
1) The export of goods;
2) Intra-Community supply of goods;
3) The products listed in Annex V of the VAT Directive and which can be placed into a licensed VAT warehouse;
4) Supply of services which are not deemed to be supplied in Estonia.
Until December 31, 2025, a taxable person will be entitled, on the basis of a written contract concluded before May 1, 2023, to apply the 20% VAT rate applicable to the supply of goods or services, provided that the relevant contract provides that the price of the goods or services includes VAT at a rate of 20%, or a 20% VAT rate % is added to the price and the contract does not provide for a change in the price resulting from a possible change in the rate of VAT.
Other indirect tax types in Estonia include excise duty and the environmental protection charge.
| VAT options in Estonia |
Applicable / limits |
| Distance selling |
From 1 July, 2021, the OSS system is applicable. |
| Call-off stock |
 |
| VAT group registration |
|
| Cash accounting - yearly amount in EUR (approx.)* |
Yes. Cash accounting possible up to EUR 200,000 yearly. |
| Import VAT deferment |
Yes, on certain goods |
| Local reverse charge |
Yes, in some cases |
| Option for taxation |
| - letting of real estate |
Yes, in some cases |
| - supply of used real estate |
Yes, in some cases |
| VAT registration threshold* |
> EUR 40,000 |
Personal income tax / Social security system
Estonia has a proportional (i.e. flat) tax rate of 20% which applies to all items of income derived by any resident taxpayer. The gross income of resident individuals includes their worldwide income from all sources, irrespective of the origin of the income.
Taxable income includes both active income such as employment and business income, as well as passive income. An annual basic exemption of 7848 euros is provided for an annual income of up to 14,400 euros. If annual income increases from 14,400 euros to 25,200 euros, the basic exemption decreases proportionally. If annual income is above 25,200 euros, the basic exemption drops to 0.
The Estonian social tax of 33% (comprising 20% social security contributions and 13% health insurance contributions) must be paid by employers in addition to the gross salary. Currently, employees are not required to make any personal social tax contributions. The Estonian pension system is based on three pillars.
Wage related taxes
in Estonia |
Minimum wage |
Average wage
in private sector |
| |
in EUR |
|
in EUR |
|
| |
820 |
|
1849 |
|
| Total wage cost |
1,097 |
133.80% |
2,474 |
133.80% |
| Vocational training contribution |
- |
- |
- |
- |
| Social Contribution tax |
271 |
33.00% |
610 |
33.00% |
| Employer Health contributions / Unemployment tax |
7 |
0.80% |
15 |
0.80% |
| Gross salary |
820 |
100.00% |
1,849 |
100.00% |
| Personal income tax* |
27 |
20.00% |
320 |
20.00% |
| Employees' Social contributions (inc. Funded pension II pillar) |
16 |
1.49% |
37 |
1.49% |
| Employees' Health contributions / Unemployment tax |
13 |
1.20% |
30 |
1.20% |
| Net salary |
763 |
93.07% |
1,462 |
79.07% |
*Salary 0 -14,400 ALL PIT rate 0%.
Salary 14,001 - 25,200 due to change in tax exempt income, the effective PIT rate varies proportionally
Salary over 25,200 ALL PIT rate 20%