Taxes in Estonia

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.

State taxes enter into the country’s national budget. These are:

  • Income tax
  • Social tax
  • Land tax
  • Gambling tax
  • Turnover tax
  • Custom tax
  • Excise duties
  • Heavy vehicle tax

Local taxes are determined by the county or city assembly in accordance with the conditions laid down in the Local Taxes Act. These are:

  • Sales tax
  • Boat tax
  • Advertising tax
  • Road and street closures tax
  • Motor vehicle tax
  • Pet tax
  • Entertainment tax
  • Parking fees

Tax rates

  • Income tax for private person – 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.
  • Social tax is levied to obtain the income necessary for State pension and health insurance, from payments made in the context of an employment or service relationship, from payments made in favour of a member of the management or control body of a legal entity, Payments made under a contract of obligations concluded for the provision of services to an individual, as well as special benefits and income tax paid from that place. In such cases, the payer of the social tax is the person who makes the payment, and the tax period is the calendar month.
  • Unemployment insurance rates: 1.6 per cent for the worker and 0.8 per cent for the employer.
  • The compulsory cumulative pension payment rate is 2 per cent.
  • In calculating the December 2020 payroll and other payments and calculating the taxes (payments) accrued/withheld, it should be borne in mind that taxes are calculated on a cash basis.

Read more here.

More information

Estonia taxThe income tax is paid by resident natural persons on their entire income, regardless of the place (state) where it was earned. Suppose a person wishes to have an income tax deducted from his or her salary or other income during a tax-free calendar year. In that case, he or she should present to the person making the payment, A free written statement to that effect. At the same time (during the same month), tax-free income for only one person paying (for example, the employer) can be counted.

A land tax is a state tax paid in full to the local government budget at the location of the land. The amount of land tax is determined by multiplying land taxation by the rate of land tax. All land is taxed, and the landowner pays the tax and the land user in certain cases. Land tax benefits are of two types: A benefit related to the taxpayer’s identity (for example, pensioners who have been repressed). A benefit related to the intended use of the land or to the restrictions placed on the land use (for example, arable land and natural meadows, as well as the land where economic activity is restricted).

Heavy vehicles are taxed for trucks and road trains with a vehicle weight of 12 tonnes or more. The heavy vehicle tax period is a quarter. The truck and the road train (heavy vehicle) are taxed according to the registration or gross mass, the number of axles and the type of spring suspension of the moving axle. Heavy vehicles of the Defence Forces, the Defence Union, police agencies and rescue agencies, and heavy vehicles of the leading rescue work of local self-government are exempt from tax on heavy vehicles, A non-profit association, fund or enterprise is used mainly for rescue operations.

A customs duty is a state duty established by European Union legal acts, which a person or business association must pay if it imports goods from third countries to the European Union (import duty) or exports the goods to third countries from the European Union (export customs duty). There are no import and export customs duties between the Member States or any similar taxes in the European Union, and uniform customs duties are imposed on third countries.

The gambling organizer pays the gambling tax. The gambling tax period is a calendar month. When organizing a tournament for luck, the period of taxation corresponds to the period of one tournament, which begins on the first day of the acceptance of the participation fees specified in the tournament rules. It ends on the day of the cancellation of the participation fee. In the case of a trade lottery, the tax period corresponds to the period of the trade lottery, which begins on the first day of the contributions specified in the game’s rules and ends on the last day of the winnings.

Excise duties in Estonia are set for alcohol, tobacco, fuel and electricity, and packaging. The Act mainly regulates excise taxation on Alcohol, Tobacco, Fuel and Electricity Excise (ATKEAS) and the Act on Excise on Packaging.

LKS Consult OÜ provides legal advice on taxation as well as accounting services for Estonian companies. Please contact us and present your enquiry.