Corporate tax rates in Estonia
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.
Withholding taxes in Estonia
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.
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
Other corporate taxes in Estonia
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.
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.