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Setting up a company in Estonia : Corporate taxes

Main corporate taxes

Main taxes Rate
Corporate Income Tax: Estonia levies a distribution tax (in lieu of a corporate tax) on a company's profit. All undistributed corporate profits are tax-exempt. This exemption covers both active (e.g. trading) and passive (e.g. dividends, interest, royalties) types of income. It also covers capital gains from the sale of all types of assets, including shares, securities, and immovable property. 20% CIT at 20/80 of the net amount of profit distribution
Tax Rate For Foreign Companies Resident companies are taxed on profits distributed from their worldwide income, while permanent establishments of non-resident companies are taxed only on profits distributed from Estonian-source income. Other income sourced in Estonia derived by non-residents may be subject to final withholding tax or corporate income tax rate by way of assessment.
Companies are considered resident if they are established pursuant to Estonian law.
Capital Gains Taxation Capital gains are treated as ordinary income of Estonian resident companies; however, they are taxed only where there is a profit distribution.
Main Allowable Deductions and Tax Credits Companies are no longer subject to income tax, they are only taxed on distributed benefits according to the Estonian Company Tax Law. According to the terms of this new law, legal entities are exempt from tax on profits that are not distributed, whether reinvested or retained. Payments made to foreign affiliates are also exempt from tax when they serve the business interests of the company. As a result, there is no provision for depreciation or for carrying forward or backward tax losses.
Since 1 January 2018, companies that are subject to tax on benefits in kind granted to staff may be exempted up to a maximum of EUR 100 per quarter if these benefits relate to expenditure on sports or health programmes. Entertainment expenses may be exempted from corporate tax up to a maximum of EUR 32 per month.
All taxes paid are deductible.
Other Corporate Taxes Land is subject to a tax which is calculated according to the estimated value of the land at rates varying between 0.1% and 2.5% depending on the municipality. The tax can be paid by the owners or the users.
The social tax payable by the employer amounts to 33% of the salary (20% for the pension fund, 13% for the health insurance). Employers also contribute 0.8% of the salary for unemployment insurance and withhold 1.6% for their employees' contributions to the compulsory accumulative pension scheme, if the employee has joined such scheme.
Employers are liable for tax on fringe benefits granted to employees. Benefits are subject to a 20/80 corporate income tax and 33% social tax on the sum of the benefit and the 20/80 CIT (a fringe benefit of EUR 100 would give rise to a EUR 25 CIT and a EUR 41.25 social tax with a 33% tax applying to EUR 125).
A gambling tax is levied on income derived from the operation of games of skill, totalizers, betting, lotteries and promotional lotteries. The tax is also levied on gaming tables and machines used for games of chance in authorised premises.
Taxes apply on heavy goods vehicles, at rates varying between EUR 0 and 930.4 per year.
Local authorities may also levy certain taxes, often at negligible rates for companies.
 
Withholding Taxes
  • Dividends: 0%/7% (dividends paid to individuals if the distribution has been subject to the reduced CIT rate at the hands of the paying company)
  • Interest: 20% (resident individuals)/0% (non-residents)
  • Royalties: 0% (resident companies)/10% (non-resident companies and individuals)/20% (resident individuals)
Tax Authorities
Overview of Estonia's tax measures in response to Covid-19
Estonian Tax and Customs Board (EMTA)
Ministry of Finance of the Republic of Estonia
Other Domestic Resources
Estonian Investment and Trade Agency - Tax Legislation
Estonian Income Tax Act - Estonian Official Gazette

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Latest Update: July 2022