Turnover tax rates: 20%, 9% and 0%
Tax rate 0%
In accordance with the Law on Turnover Tax, turnover tax is not levied on the turnover of the following goods and services of a social nature:
- All-embracing postal service
- Health care service*
- Services provided by a non-profit association to its members free of charge or for a membership fee
- Social service*
- A shelter service related to the protection of children and adolescents
- Education in the field of primary, basic, vocational, secondary or higher education
- transportation of sick, wounded persons or persons with disabilities in a specially adapted vehicle*
- Insurance service
- Provision of an immovable thing or part of it for rent or lease*
- Immovable things or part of them*
- Lottery tickets and gambling organization*
- Investment gold*
- Products, the acquisition of which did not have the right to deduct the input turnover tax*
- Financial services (the full list can be found with our consultant)
* The detailed conditions of non-taxable turnover can be found out from our consultant
Tax rate 9%
The turnover tax rate is 9 percent of the taxable value of the following goods and services:
- Books and educational literature in both paper and electronic form*
- Medicines included in the list of medicines established by the decree of the minister responsible for this area
- Accommodation or accommodation with breakfast
* The detailed conditions for applying the 9% rate can be found out from our consultant
Tax rate 20%
Services and goods that are not included in the list of non-taxable turnover and subject to a rate of 9% are taxed at a rate of 20%
Before reaching a turnover of 40,000 euros from the beginning of a calendar year, the company is not required to register as a taxpayer, but it can do so voluntarily.
Income tax rates: 20%; 14%, 10%, 7%, 0%, 20/80, and 14/86
Tax rate 20%
It applies to an individual – both a resident and a non-resident, who receives income subject to taxation.
The 20% tax rate also applies to a non-resident legal entity that does not have a permanent place of business in Estonia.
The amount of income of an individual that is not subject to income tax depends on the amount of his or her income, and will reach 654 euros per month from 2023.
Tax rate 14%
In accordance with the Income Tax Law, it is applied to advance payments of credit institutions
Tax rate 10%
It is applied to payments to individuals – owners of investment pension account units who have reached the age of old-age pension or will reach it within five years.
Tax rate 7%
In accordance with the Income Tax Law, the 7% tax rate is applied to regularly paid dividends.
If dividends are paid to a non-resident individual, then in case of application of a double taxation treaty, the income tax withholding rate specified in the agreement should be applied if it is less than 7%.
If an Estonian commercial partnership pays dividends to an individual whom it taxed at the rate of 14/86, then the payer already withholds 7% of income tax from the payment of dividends, and the individual no longer must pay income tax on dividends.
Tax rate 0%
It is applied to remuneration for the work of a member of the ship’s crew for work on the ship.
Tax rate 20/80
It is applied to resident legal entities and non-resident legal entities whose place of business is Estonia, when making the following payments:
- Special benefits*
- Meal and entertainment expenses
- Expenses not related to business activities, etc.
You can find out the full list of payments from our consultant.
Tax rate 14/86
It is applied to regularly paid dividends to a resident legal entity or a non-resident legal entity whose permanent place of business is Estonia.
Simplified taxation of entrepreneurial income
If an individual opens an entrepreneurial account, he or she has the opportunity to fulfil his tax obligation on the basis of the Law on Simplified Taxation of Entrepreneurial Income.
The entrepreneurial income tax rate is:
- 20% on the amount of income up to 25,000 Euros
- 40% on the amount of income above 25,000 Euros
An individual who has an entrepreneurial account is not required to register as an entrepreneur and keep records of income and expenses.
In Estonia, this opportunity is provided by the LHV Bank.
Learn the pros and cons of an entrepreneurial account from our consultants.
Social tax rate 33%
The obligation to pay social tax arises for the following persons:
- A resident legal entity
- An individual
- A non-resident who has a permanent place of business in Estonia
- An individual–entrepreneur
The monthly rate, which is the basis for calculating the minimum social tax obligation, is 584 euros, which implies a minimum social tax obligation of 192.72 euros per month.
An individual-entrepreneur pays social tax per year starting from at least 12 times the monthly social tax rate (584 euros).
According to Article 4 of the Law on Social Tax, social tax is paid by:
1) A resident legal entity;
2) An individual;
3) A non-resident who has a permanent place of business in Estonia or who makes payments specified in paragraph 1 of Article 2 of the Social Tax Law;
4) An institution of the state, municipality or city;
5) the state, municipality or city in cases specified in Article 6 of the Law on Social Tax.
Unemployment insurance payments
The unemployment insurance payment rate in 2023 will be 1.6% for an employee and 0.8% for an employer.
Contribution to the funded pension
The funded pension contribution rate is 2%.
The funded pension taxation payment applies to residents of Estonia who are obliged or voluntarily joined the second stage. Payment is made by withholding the payment amount from the employee’s payment amount by the employer.
From 2021, it is possible to apply for suspension of contributions.
The salary of non-residents of Estonia is not subject to the funded pension payment.
Also, in Estonia there are such taxes as:
- Land tax
- Advertising tax;
- Tax on road or street closures;
- Motor vehicle tax;
- Animal welfare tax;
- Entertainment tax;
- Parking fee.
- Payment for the use of the environment
You can find out more about the rates and conditions from our consultant
Estonia has established excise taxes on alcohol, tobacco products, fuel, and electricity, as well as on packaging.
It is planned to increase the excise tax on tobacco and tobacco products by 5% in 2023.
According to the law on Excise Taxes on alcohol, tobacco, fuel and electricity, reduced excise rates on electricity and certain types of fuel will be valid until May 1, 2023.
The land tax is paid by the owner of the land or the user of the land in the cases specified in Article 10 of the Law on Land Tax.
The amount of land tax depends on the current local government land tax rate and the land value.
The tax rate is set by the Local Government Council no later than January 31 of a tax year, and the land tax rates are published on the website of the Tax and Customs Department.
The land tax rate is 0.1–2.5% of the taxable value of land per year. The land tax rate for lands used for growing agricultural products of natural meadows/pastures is 0.1–2.0% of the taxable value of the land per year. The Tax and Customs Department calculates the land tax and sends you a notice of the tax that should be paid to the department. If the annual amount of land tax does not exceed 64 euros, then the land tax should be paid in the form of a one-time payment by March 31. If the tax amount exceeds 64 euros, then by March 31, at least half of the tax amount should be paid, but not less than 64 euros. The remaining amount should be paid by October 1.
Heavy vehicle tax
Tax on trucks is levied on goods intended for the transportation of goods:
1) A truck or a vehicle with a gross weight of 12 tons or more registered in the road register, with the exception of the truck specified in paragraph 2) of this section;
2) A train of vehicles with a registered or gross weight of 12 tons or more, consisting of a truck and one or more trailers, whose truck is registered in the road register.
The basis for calculating the tax is the register weight, the number of axles and the type of suspension of the driving axle. The tax rates are given in the appendix to the law.
The tax period for the tax on heavy vehicles is a quarter, and the tax should be paid to the Tax and Customs Department by the 15th day of the first month of the quarter.
The accountants and tax consultants of Wisor Group OÜ will be happy to advise you on tax issues related to your Estonian company and provide accounting services in Estonia.