When choosing the appropriate jurisdiction, it is worth considering each specific situation: the type of activity of the company, its organizational and legal form, the purpose of the owner, the desire or unwillingness to become a resident of the country and much more:
- Amount of authorized capital at company registration
- Corporate tax rate and special profit allocation conditions
- Conditions for residents and non-residents
- Protection of company assets
- Foreign exchange risks
- Taxation for natural persons
Estonia is well known for the friendly attitude of officials towards business and developed digital infrastructure. Almost all business processes can be controlled online – register a company, file reports, ask questions to public services, etc. It also attracts moderate prices for business support.
Taxes in Estonia are administered by the Estonian Board of Taxes and Customs. A large proportion of tax returns are available via the Internet.
Main tax advantages:
- There is no tax on retained earnings.
- Profit tax is paid only when a company decides to distribute dividends to its owners Corporate tax rate on allocated profits is 20% (14% may be applied in some cases since 2020)
- The VAT rate for certain goods and services is 0% and 9%.
- Standard VAT rate is 20%
- Double taxation treaties with 60 countries worldwide, including Belarus and Ukraine.
The Estonian tax system consists of state and local taxes:
State taxes are income tax, social tax, land tax, heavy vehicle tax, sales tax, customs duty, gambling tax, excise tax and enterprise income tax. The Government Revenue Manager is the Tax and Customs Department, which ensures that taxes are paid into the State budget.
Local taxes include advertising tax, road and street closure tax, vehicle tax, entertainment tax and parking fees. In addition, part of the tax on personal income as well as the land tax are paid into the budget of local governments.
Simplicity of the tax system plays a very important role in tax collection and the confidence of taxpayers. In comparison with other European Union countries, Estonia has always been positively identified in this respect. We have mostly uniform tax rates and fewer differences. This means that tax obligations are easily understood and respected.
A simpler tax system also means lower tax collection costs. Thanks to a simple system and electronic service, Estonia needs only 37 EUR cents to collect tax revenues of 100 EUR, which is one of the best results among developed countries. All people enjoy the benefits of society, but when taxes are no longer paid, the State is under-resourced and these benefits become unavailable.