Corporate Tax in Estonia

Estonia’s taxation system is comprised of national and local taxes but it is very attractive to foreign investors for setting up companies due to the corporate tax that is applied to profits only after they are distributed.

 

 

As mentioned above the Estonian corporate tax is applied to corporations only on distributed profits and it has a flat rate of 21% on the gross amount and it is calculated at 21/79 on the net value of the dividend. If the profits have not been distributed yet, the corporate tax rate is zero. Estonian companies will pay the corporate tax rate on their incomes made all over the world, but foreign companies will only be taxed on the earnings they make in the country. It is also important to know that Estonia has signed double tax treaties with other countries in order avoid the corporate tax being applied twice and to attract foreign investors.

 

 

In 2009 Estonia removed the withholding tax that applied to dividends. However, a withholding tax of 10% is applied on royalties. The same tax rate applies if foreigners provide any type of service in Estonia. As with the corporate tax, in case a double tax treaty is enforced the withholding tax may be reduced.

 

Estonian residents paying interests to foreign individuals or legal entities usually are not required to pay any withholding tax, but the tax could be applied if the foreign investor obtains any gain from Estonian contractual funds and even if the withholding tax is not levied the transfer pricing rules apply.

 

Foreign investors will also be required to pay a tax if they make profit after renting a real estate property in Estonia, or a withholding tax on royalties from using intellectual property rights. However, royalties will not be taxed if the shareholder is a company registered in an EU member state and holds at least 25% of the company’s share capital.

 

 

The Estonian taxation system imposes a tax on real estate property that has a variable rate of 0.1% to 2.5% and that is applied on the presumed value of the land plot the property is built on. Companies must also pay a social security tax that is made of the social and health insurance tax rate of 33%.

 

Investors who wish to know more about how they can remain in Estonia based on a temporary residence permit for business can discuss this matter with one of our lawyers. We can give you details on the eligibility criteria for obtaining Estonian residency for business, submitting the application, where to pay the application fees, as well as other important details.

 

If you want to open a company and need details about the taxation system you can contact our law firm in Estonia.

 

We also assist individual clients who have questions bout taxation in Estonia, particularly once they decide to relocate to the country, and in the event in which they wish to incorporate an Estonian company. We also answer questions about residency, remaining in the country on a permanent basis and the mandatory conditions that apply to foreigners who wish to apply for citizenship in Estonia. 

 

Starting and ending the process to immigrate to Estonia is easier with our help. Our team provides tailored assistance, according to the applicant’s nationality, and we can guide you throughout the needed submissions. After five consecutive years in the country, you will apply for either a right of permanent residence, or a long-term residence permit, based on nationality.