Advantage of Taxation in Estonia

taxation-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. 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 taken into account that while the share capital is not contributed, the owner (founder) is personally liable with their unauthorised funds in the share capital.

The main taxes for companies in Estonia are available here.

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

Corporate income
taxes

Income tax — 0%
there is no income tax in Estonia.

Value added tax (VAT) — 20%
is applicable if a company is taxable, i.e. a VAT payer.

Tax on dividends — 25%
dividends can be paid from the net profit.

Personal income taxes

(for Estonian residents only)

Unemployment tax — 1.6% for the employee and 0.8% for the employer.

Social tax — 33%
only applicable to Estonian residents

Income tax on natural persons — 20%
is applied if a fixed salary is being paid.

Payroll taxes

(for non-residents)

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

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

More information available at e-MTA.

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.

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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