ADVANTAGE OF TAXATION IN ESTONIA

Taxation in Estonia is growth-friendly and allows foreign companies to optimise tax costs. Estonian tax system provides for the payment of income tax only in the case of distribution that allows foreign companies to use an Estonian company for reinvestment.

There are many statutory “preferential” business opportunities in Estonia, unique in its financial and legal nature in comparison with other EU countries. The legislation of Estonia states that at the time of the company establishment there is no need to make its share capital (2,500 EUR). The determined period for its formation according to the legislation is up to the date of payment of dividends. But it should be noted, that if the authorised capital is not paid, the owner (founder) is responsible for its own funds in the amount of authorised capital.

The main taxes for companies in Estonia are available HERE.

If the principal activity of the Estonian company will take place in another country, the company be a tax resident of the country, where the principal activity takes place. In the case of the establishment of an Estonian company in another country, the taxation will be subject to the law of that respective country.grow

Corporate income tax in Estonia:

  • income tax — 0% (in fact, there are no income taxes in Estonian legislation, but there is the tax on allocated profits, that applies only in the case of payment of dividends);
  • value added tax (VAT) — 20% (in case the company is taxable, i.e. a VAT payer);
  • tax on dividends — 25%. More information can be found at Online Estonian Tax and Customs Department.

Personal income tax:

  • social tax — 33% (Estonian residents/citizens only)
  • unemployment tax — 1.6% for the employee and 0.8% for the employer (only applies to residents of Estonia)
  • income tax on natural persons — 20% (applies only to Estonian residents if a fixed salary is being paid)

Payroll taxes for non-resident

  • If an employee is a non-resident of Estonia, the income tax is withheld at a rate of 20%

A member of the Board of the Estonian company has the right not to pay himself a salary and, as a result, there is no need to pay salary taxes from it.

FOREIGN PARTICIPATION AND FOREIGN MEMBERS OF THE MANAGEMENT BOARD

In Estonia, when establishing company, the non-residents are provided with all necessary services of the financial and public sectors both in Estonian and English languages. So far, Estonia has entered into the Convention for the Avoidance of Double Taxation with 59 countries. The standard VAT rate (value added tax) is 20% of the cost of goods or services, while internal transactions within the EU countries are exempt from VAT. This, and the fact that a member of the Board of an Estonian company is spared from paying the salary to one’s self makes for a growing interest in Estonia as the starting point for the arrangement of international business and is increasing year by year.

The Estonian tax system ensures a favourable environment for growing business due to the following reasons:

  • good reputation;
  • geographical location;
  • user-friendly e-service system (in both the banking and public sectors);
  • consulting in English and Russian;
  • international double taxation avoidance agreements entered with 59 countries;
  • no currency control and no restrictions on international bank payments.

COMPANY IN ESTONIA OÜ will help you to register your business in Estonia.

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