Estonian Taxes for Companies
The Estonian taxation system is one of the most profitable in the world. It includes state and local taxes. A tax is a financial obligation that the law imposes on a taxpayer and is enforceable in the manner, amount and duration prescribed by law. The taxpayer is obliged to pay only the state and local taxes prescribed by law.
There are many statutory preferential business opportunities in Estonia. Here is one of them, which is unique in its financial and legal nature in comparison with other EU countries. According to the Estonian legislation, at the time of the company establishment there is no need to contribute its share capital (from 2,500 EUR). The articles of incorporation determine the period for the authorised capital to be contributed, which can be set from a year up to a date of payment of dividends. It should be considered that while the share capital is not contributed, the owner (founder) is personally liable with their unauthorised funds in the share capital.
Taxes in Estonia are administered by the Estonian Board of Taxes and Customs. A large proportion of tax returns are available via the Internet.
- Private person income tax on retention rate — 20%.
- The income tax rate of a legal entity applied to dividends of profits is 20/80. The income tax rate of a legal entity, which is applied to a regularly distributed profit dividend, is 14/86, and income tax is withheld at a rate of 7 per cent in addition to dividends paid to an individual.
- The amount of income tax-free depends on the income received (up to EUR 500 per month and up to EUR 6,000 per year).
- The social tax rate is 33%. The monthly rate on which the minimum social tax obligation is based is 584 euros; respectively, the minimum social tax duty is 192.72 euros per month.
- According to the Social Tax Act, social tax is paid by:
- resident legal person
- a natural person
- a non-resident who has a permanent place of business in Estonia or who makes payments
- the establishment of a State, a municipality or a city
- the State, a municipality or a city in cases specified in article 6 of the Social Tax Act.
Value Added Tax – VAT, levied on goods and services sold in business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. The final consumer pays Value-added tax.
Companies are obliged to register a VAT number when sales in Estonia exceed 40,000 EUR from the beginning of the calendar year. A company can also apply for VAT registration before this threshold value is reached.
If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
As a sales taxpayer, you must:
- When selling a good or providing a service, add a sales tax to the sales price; Keep a record of turnover tax
- Calculate and pay the sales tax
- Keep the documents relating to the transactions and issue the appropriate invoices
From the taxable turnover, you can deduct the turnover tax (turnover input tax) paid on the purchase of a good or service used for the purposes of the taxable turnover.
According to the Estonian regulations, the total rate of turnover tax is 20 per cent of the taxable value of the good or service.
The specialists of Company in Estonia OÜ will be happy to assist you with accounting services for your Estonian company.