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Estonia

Osaühing OÜ (Private Limited Company)

Taxes

Basis – Corporate income tax is levied on worldwide income.

Tax rate – Undistributed profits are tax exempt. Profits distributions are usually subject to a 20% tax (20/80 of the net distributed amount).

A lower rate of 14% may apply for companies making regular profit distributions: payment of dividends in the amount that is below or equal to the extent of taxed dividends paid during the three preceding years.

Capital gains – Capital gains are considered ordinary income and taxed when they are distributed.

Dividends – Dividends are considered ordinary income and taxed when they are redistributed. However, corporate income tax will not apply on a redistribution of dividends if the underlying dividends are received from a subsidiary that is tax resident in EEA or Switzerland, and the Estonian company holds at least 10% of the shares or votes of the distributor. This exemption also applies if the subsidiary is a non-EEA/Switzerland resident and profits have been previously taxed in the foreign jurisdiction.

Interests – Interests are treated as ordinary income and taxed when company profits are distributed.

Royalties – Royalties are treated as ordinary income and taxed when company profits are distributed.

Withholding Taxes – There is no withholding tax on dividends. However, if dividends are subject to the reduced corporate income tax (14%) and are distributed to individuals (residents or non-residents), they may be subject to a 7% withholding tax, unless it is reduced due to a tax treaty.

There is no withholding tax on interests, unless interests are derived by a non-resident investor from an Estonian contractual fund or other pool of assets (10%).

Royalties paid to non-residents are subject to a 10% withholding tax, unless tax rate is reduced under a tax treaty or exempted via the EU interests and royalties directive.

Foreign-source income – Foreign-source income is generally subject to corporate tax.

Losses – As taxes are levied on distributed profits, there are no adjustments to accounting profits for tax purposes.

Inventory - As taxes are levied on distributed profits, there are no adjustments to accounting profits for tax purposes.

Anti-avoidance rules – Transfer pricing rules are applicable to all types of transactions between related persons, which must be conducted at arm’s length.

There are no thin capitalization rules and CFC rules only apply to individuals.

Labor taxes – Employers must pay social tax on certain payments to individuals at the rate of 33%. Additionally, employers and employees must pay unemployment social contributions at 1% and 2%, respectively.

Tax credits and incentives – There are no additional tax credits or incentives.

Personal income tax – An individual is considered a tax resident in Estonia if he or she has a permanent residence and/or stay more than 182 days in Estonia in a 12-month period.

Tax residents are subject to income tax on their worldwide income at a flat rate of 20%. Non-residents pay taxes on their income accrued in Estonia.

Capital gains are considered ordinary income and taxed at standard income tax rate. Investment income is usually taxed at normal rates. However, a tax deferring may be available under an investment account scheme where individuals can reinvest investment income and capital gains tax-free.

Domestic dividends are exempt from taxation, dividends obtained abroad are exempt provided that were taxed on source. Interests from financial institutions of the EEA are tax exempt.

Rental income and royalties are considered ordinary income and therefore taxed at the applicative tax rate.

Other taxes – V.A.T. standard rate is 20%. Reduced rates of 9% and 0% apply to certain goods and services.

Lands are subject to a property tax that ranges from 0.1% to 2.5%, except for residential lands. There are no transfer, inheritance and net worth taxes in Estonia.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 20% Offshore Income Tax Rate
  • 20% Corporate Tax Rate
  • 20% Capital Gains Tax Rate
  • 20% Dividends Received
  • 0% Dividends Withholding Tax Rate
  • 0% Interests Withholding Tax Rate
  • 10% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • 0 Losses carryforward (years)
  • 50 Tax time (hours)
  • 8 Tax payments per year
  • 2% Social Security Employee
  • 34% Social Security Employer
  • 20% Personal Income Tax Rate
  • 20% VAT Rate
  • 58 Tax Treaties

Country details

Estonia
EUR
Tallinn
Europe
e t , r u
1291170

The Republic of Estonia, is a Baltic Republic located in the north of Europe. Being independent of the Soviet Union in 1991, since 2004 it has been part of the European Union (EU) and NATO. It is bordered to the south by Latvia, to the east by Russia, to the north by the Gulf of Finland and to the west by the Baltic Sea. 

The country is inhabited by approximately 1,287,000 people. Its capital and most populated city is Tallin. Its official language is the Estonian, although about a third of its population is Russian-speaking. In 2011, the Euro (EUR) replaced the Estonian kroon (EEK) as its official legal tender currency. The country also stands out for its responsible public finances, being the least indebted state (9.6% of GDP) of the OECD.

Estonia is a world leader in digital governance and is one of the most digital advanced countries. All Estonians receive a digital ID card that gives them access to around 4,000 services online, from managing their finances, registering companies, signing digital contracts, paying taxes or asking for prescriptions, even voting. 

They are also pioneers in the conception and implementation of the E-Residency, a transnational digital identity card for non-residents issued and backed by the Estonian Government.

Its developed telecommunication and digital infrastructures offer a superior environment for business operation. Being one of the world’s top countries in tech areas such as fintech, cyber security centers, security software development, systems integration and defense software, mobile security and wireless security. Estonia has an innovative talent pool, with a strong international reputation for know-how and innovation, and a vibrant and growing ecosystem for tech startups.

Estonia is also one of the most business liberal countries. Non residents can register a company online in less than 1 hour and manage it remotely. It has also a competitive tax system, where reinvested profits are tax free. 

Tax treaties

Country Type Date Signed
Netherlands DTC  1997-03-14
Morocco DTC  2013-09-25
Austria DTC  2001-04-05
Denmark DTC  1993-05-04
Armenia DTC  2001-04-14
Slovenia DTC  2005-09-13
Romania DTC  2003-10-23
Kazakhstan DTC  1999-03-01
Uzbekistan DTC  2012-10-02
Cyprus DTC  2012-10-15
Sweden DTC  1993-04-05
Mexico DTC  2012-10-19
Croatia DTC  2002-04-03
France DTC  1997-10-28
Latvia DTC  2002-02-11
United Kingdom DTC  1994-05-12
Belarus DTC  1997-01-21
Serbia DTC  2009-09-24
Iceland DTC  1994-06-16
Greece DTC  2006-04-04
Portugal DTC  2003-05-13
Czech Republic DTC  1994-10-24
Georgia DTC  2006-12-18
Turkey DTC  2003-08-25
Slovakia DTC  2003-10-21
Albania DTC  2010-04-05
India DTC  2011-09-19
Poland DTC  1994-05-09
United Arab Emirates DTC  2011-04-20
Norway DTC  1993-05-14
Korea, Republic of DTC  2009-09-23
Ukraine DTC  1996-05-10
Former Yugoslav Republic of Macedonia DTC  2008-11-20
Canada DTC  1995-06-02
Azerbaijan DTC  2007-10-30
United States DTC  1998-01-15
Thailand DTC  2012-10-25
Singapore DTC  2006-09-18
Malta DTC  2001-05-03
Switzerland DTC  2002-06-11
Italy DTC  1997-03-20
Bulgaria DTC  2008-10-13
Lithuania DTC  2004-10-21
Germany DTC  1996-11-29
Belgium DTC  1999-11-05
Isle of Man DTC  2009-08-06
Finland DTC  1993-03-23
Turkmenistan DTC  2011-12-28
Moldova, Republic of DTC  1998-02-23
Luxembourg DTC  2006-05-23
Russian Federation DTC  2002-11-05
Spain DTC  2003-09-03
Jersey DTC  2010-12-21
China DTC  1998-05-12
Ireland DTC  1997-12-16
Bahrain DTC  2012-10-12
Israel DTC  2009-06-29
Hungary DTC  2002-09-11

Procedures

We can help you incorporate a Osaühing in Estonia.
Please, contact us to request a free, no obligation consultation.

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