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

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. The legislation of Estonia means that at the time of the establishment of the company there is no need to make its share capital (2,500 euros). 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 authorized capital is not paid, the owner (founder) is responsible for its own funds in the amount of authorized 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 has to be a tax resident of the country where the principal activity takes place. In the case of residency of an Estonian company in another country the taxation will be subject to the law of that respective country.

Taxes for companies 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)
  • the value added tax (VAT) – 20% (there is in the case, if 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

Taxes for individuals:

  • social tax – 33% (it occurs residents/citizens of Estonia only)
  • unemployment tax -1.6% for the employee and 0.8% for the employer (only applies to residents of Estonia)
  • income tax on physical persons – 20% (if calculated and paid salary and applies only to residents of Estonia)

Payroll taxes for non-resident

  • when an employee is a non-resident of Estonia, then only 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, they have no need to pay salary taxes from it.