Estonia
Financial Year – 1 January – 31 December
Currency – Euro (EUR)
Corporate Tax Summary
Residence – A legal person is a resident if it is established pursuant to Estonian law.
A European Company (in Latin Societas Europaea, SE) and European Cooperative Society (in Latin Societas Cooperativa Europaea, SCE) are regarded as residents of Estonia if their place of establishment is registered in Estonia.
Basis of Taxation – In Estonia profits are not subject to tax when they are earned, but the moment of taxation is deferred until the distribution of profits. Estonia levies corporate income tax on profits that are distributed as dividends, share buy-backs, capital reductions, liquidation proceeds or deemed profit distributions (such as transfer pricing adjustments, expenses and payments not related to business, gifts, donations and entertainment expenses).
Fringe benefits are taxable at employer level. The employer pays income tax and social tax on fringe benefits.
Dividends distributed by Estonian companies are exempt from corporate income tax (“participation exemption”) if these are paid out of:
- Dividends received from Estonian, EU, EEA (European Economic Area) and Swiss tax resident companies in which the Estonian company has at least a 10% shareholding.
- Profits derived through a permanent establishment (“PE”) in the EU, EEA or Switzerland.
- Dividends received from all other foreign companies in which the Estonian company has at least a 10% shareholding, provided that either the underlying profits have been subject to foreign tax or foreign income tax was withheld from dividends received.
- Profits derived through a foreign PE in all other countries, provided that such profits have been subject to tax in the country of the PE.
- Liquidation proceeds, payments upon share buy-backs or capital reductions, which have been subject to taxation by the distributor of such income.
| Reference | ||
| Corporate Income Tax Rate (%) | The standard rate is 20% and the reduced rate is 14% | Distributed profits are generally subject to 20% corporate income tax (20/80 on the net amount of profit distribution). As the tax period of corporate entities is a month, the income tax shall be returned and paid monthly by the 10th day of the following month. As of 1 January 2019, the reduced corporate income tax rate of 14% is applicable to regular profit distributions. Namely, the reduced tax rate is applicable to the profit distributed in a calendar year which is smaller than or equal to the average distributed profit of the previous three calendar years on which a resident company has paid income tax. Dividends, which are taxed at a rate of 14% and paid to individuals, are subject to withholding tax at a rate of 7%. |
| Branch Tax Rate (%) | See reference | A permanent establishment of a non-resident legal person located in Estonia is taxed on the same basis as an Estonian company, i.e. only on the distribution of profits attributed to the permanent establishment. Income received by other non-residents from Estonia is taxed in accordance with §§ 29–31 of the Income Tax Act and, unlike Estonian residents, the list of types of taxable income of non-residents is final in law. Income received by a non-resident in Estonia, which is not mentioned in the Income Tax Act, is not taxed in Estonia. |
| Withholding Tax Rate: | ||
| Dividends – Franked | See Corporate Income Tax Rate reference section | |
| Dividends – Unfranked | See Corporate Income Tax Rate reference section | |
| Dividends – Conduit Foreign Income | See Corporate Income Tax Rate reference section | |
| Interest | 20% | Interest payment subject to income tax paid to a resident natural person, common investment fund or public limited fund. Income tax is generally not charged on interest received by a non-resident. Income tax is charged on interest received from the holding in a contractual investment fund or other pool of assets of whose property, at the time of the transfer or during a period within two years before the transfer, was directly or indirectly made up to more than 50 percent of immovables or structures as movables located in Estonia, and in which the non-resident had a holding of at least 10 percent at the time of transfer. |
| Royalties from Intellectual Property | 20% or 10% | 20% on royalties payable to a resident natural person 10% on royalties paid to a non-resident |
| Fund Payments from Managed Investment Trusts | ||
| Branch Remittance Tax | ||
| Net Operating Losses (Years) | ||
| Carry Back | ||
| Carry Forward |
Individual Tax Summary
Residence – A natural person is a resident if one of the following conditions is met:
- His or her place of residence is in Estonia.
- He or she stays in Estonia for at least 183 days over the course of a period of 12 consecutive calendar months. A person shall be deemed to be a resident as of the date of his or her arrival in Estonia.
- Estonian diplomats who are in foreign service are also Estonian residents.
A non-resident is a natural person not specified above.
Basis of Taxation – Residents pay tax on their worldwide income. Taxable income includes, in particular, income from employment (salaries, wages, bonuses and other remuneration); business income; interest, royalties, rental income; capital gains; pensions and scholarships (except scholarships financed from state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.
Non-residents pay income tax on their income from Estonian sources. Income taxable in Estonia includes, subject to certain conditions, income from employment or government services provided in Estonia; directors’ fees; business income; income from provision of services; income derived from commercial lease; royalties; certain types of capital gains; gains from disposal of assets registered in Estonia; interest received from the holding in a contractual investment fund (when more than 50 percent of its assets consist of immovables situated in Estonia); income of a sportsman or an artiste from his activities in Estonia; pensions, scholarships and insurance indemnities.
Unilateral relief for double taxation in respect of income derived from abroad is available in the form of ordinary tax credit with per country limitation. The credit is limited to the Estonian tax computed on the item of income. Moreover, double taxation of employment income is avoided by way of exemption method if all the following conditions are fulfilled:
- The person has stayed in the foreign state for the purpose of employment for at least 183 days over the course of a period of 12 consecutive calendar months.
- The specified income has been the taxable income of the person in the foreign state and if this is certified and the amount of income tax is indicated on the certificate (even if the amount is zero).
Filing Status – The law provides for the filing of an individual tax return only.
A resident natural person is required to submit an income tax return to the Tax and Customs Board concerning the income of a period of taxation no later than by 30 April of the year following the period of taxation. It is possible to submit an income tax return through the e-service of the Tax and Customs Board as of 15 February of the year following the period of taxation.
Personal Income Tax Rates
| Taxable Income | Tax Payable – Residents | Tax Payable – Non Residents |
| See additional comment below | 20% |
The tax rate is 20% of the taxable income. The withholding tax rate for certain pensions and certain payments made to non-residents is 10%. Employment income is subject to a withholding tax at the general rate of 20%. Dividends taxable at corporate level at 14% tax rate are subject to withholding tax at a rate of 7%.
The period of taxation is a calendar year and tax returns are due by April 30 of the year following the period of taxation.
The annual basic exemption (non-taxable amount) for resident individuals is up to EUR 6,000 per year, but decreasing depending on the total income amount. When taxable income per year exceeds EUR 14,400, the following formula for calculating the non-taxable amount applies: 6,000-6,000/10,800 x (amount of income – 14,400). If the total amount of all income is EUR 25,200 or more in a year, there is no right to basic exemption at all.
On a monthly basis, the basic allowance is EUR 500 if taxable income does not exceed EUR 1,200 per month. It is reduced linearly and reaches EUR 0 when taxable monthly income is more than EUR 2,100.
Goods and Services Tax (GST)
| Rate | Standard rate is 20% and reduced rate is 9% |
| Taxable Transactions | – Supply, except the supply exempt from tax, the place of which is Estonia. – Import of goods into Estonia, except imports exempt from tax. – Provision of services the place of supply of which is not Estonia, except supply exempt from tax. – Supply of goods or services exempt from tax whereto the taxable person has voluntarily added the amount of value added tax. – Intra-Community acquisition of goods, except intra-Community acquisition of goods which are exempt from tax. Exempted goods and services are:
|
| Registration | The threshold for obligatory registration as a taxable person is EUR 40,000. The threshold for a taxable person with limited liability is EUR 10,000 in the case of acquisition of goods. There is no threshold in the case of acquisition of services. |
| Filing and Payment | The taxable period is one calendar month and value added tax returns shall be submitted to the tax authority by the twentieth day of the month following the taxable period. A taxable person or taxable person with limited liability shall pay the amount of value added tax due by the date of submission of the value added tax return. |
Other Taxes Payable
| Tax | Reference |
| Payroll Tax | Social tax is paid by the employer and the general rate is 33% of the gross payment. Unemployment insurance premium tax is paid by the employer and the rate is 0.8% of the amount of gross salaries monthly. The income tax rate to be withheld is 20% of the gross salary of an employee (with exceptions). The unemployment insurance premium to be withheld is 1.6% of the gross salary of an employee. The funded pension payment to be withheld is 2% of the gross salary of an employee. |
| Stamp Duty | State fee rates depend on the transaction price and/or the type of service provided by the government. See State Fees Act of Estonia – https://www.riigiteataja.ee/en/eli/506072020002/consolide |
| Land Tax | National land tax is paid on all land except: (1) Where economic activity is prohibited. (2) Land attached to buildings of diplomatic or consular missions of foreign countries. (3) Cemeteries and land under churches and temples of congregations. (4) Land used by foreign countries or international organisations. (5) Land in use for the headquarters of allied forces. In addition, local land tax is not paid on land in municipal ownership or land in public use based on the decision of the local authority. The land tax rate is 0.1 – 2.5% of the taxable value. Land where economic activity is restricted by law is either exempted from tax completely or by 50% of the standard tax rate, depending on the nature of the restriction. Tax is paid twice a year on March 31 and October 1. |
Gambling tax is imposed on amounts received from lotteries, promotional lotteries, toto (totalisator + betting), remote gambling and tournaments of games of chance. Tax is charged also on gambling tables and machines used for games of chance and games of skill located on licensed premises.
Heavy goods vehicle tax is paid for the following classes of vehicles which are intended for the carriage of goods:
(1) Lorries with a maximum authorised weight or gross laden weight of not less than 12 tonnes.
(2) Road trains composed of trucks and trailers with a maximum authorised weight or gross laden weight of not less than 12 tonnes.
Last updated: 30.10.2020