Taxes for companies registered in Estonia
Corporate Income Tax
Dividend tax at source
Royalty tax at source
Local director requirement
The cost of registering a company in Estonia
Reasons to register a company in Estonia
Details of conducting international business through a legal entity in Estonia
Estonia is a small country located in the center of the Baltic Sea region - a fast-growing European market with access to 100 million potential consumers. Attractive location between East and West, a developed business environment, a stable government and a liberal economic model, low cost and ease of doing business have already attracted numerous international companies to Estonia. In 2019, Estonia ranked 15th out of 180 countries in the Economic Freedom Index. According to the World Bank (2019), the Ease of Doing Business Index gave Estonia 16th place. Estonia is a leading country in Central and Eastern Europe in terms of attracting foreign direct investment.
The total population of Estonia is about 1.3 million people.
Estonia has been a member of the EU area since 2011.
Estonia is one of the leading countries in the world in creating and implementing e-government and cybersecurity solutions. So, 99% of people use the services of Internet banking and more than 95% pay income tax via the Internet.
Estonia has been a member of the WTO since 1999, the European Union and NATO since 2004. In 2010, Estonia became the 34th member of the OECD, an organization that includes most of the most developed countries. There are currently 60 double tax treaties in force in Estonia.
The Estonian legal environment is conducive to entrepreneurship and entrepreneurial thinking. foreign
investors have equal rights and obligations with local entrepreneurs. All foreign investors can establish a company and conduct business in Estonia in the same way as local investors.
Types of companies in Estonia
Income tax in Estonia
A company's profit in Estonia is not taxed until it is distributed in the form of dividends.
It is important to note that some payments are equated by the Estonian tax authority with dividend payments:
This is not an exhaustive list. If the company circumvents the requirement to pay tax on the distribution of dividends by using "fictitious" transactions and contracts, then it is highly likely that the tax authorities will re-qualify these payments to pay dividends and oblige them to pay tax, penalties for each day of delay, a fine of up to 32,000 Euro and, in the case of an especially large scale, the risk of criminal investigation and punishment of the persons involved.
The basic income tax rate (at source) is 20/80 (20%), and the tax period is a calendar month.
VAT - 20%.
Dividends distributed by Estonian companies are exempted from corporate income tax at source if they are paid from:
The following payments are subject to corporate withholding tax at source:
Penalties for non-compliance with tax laws.
In the case of voluntary adjustment of tax returns, taxpayers must pay the unpaid tax and interest for late payment. Currently, the interest rate is 0.06% of the amount of tax due for each day of delay.
If a legal entity is not able to submit a tax return, documents or other information due to a statutory date, or if it provides false information or deliberately submits incorrect documents, then the Estonian tax authority may impose a fine of up to 32,000 Euro in addition to the need to pay tax arrears and singing. In addition, deliberate tax evasion may be subject to criminal prosecution under the Estonian Criminal Code.
In Estonia, there is a general rule against tax evasion, which allows tax authorities to ignore legal forms and reclassify them as taxable income in accordance with the “real” economic sense, if there is reason to believe that the transaction was carried out in order to avoid taxation.
For companies that regularly distribute profits, the income tax rate can be reduced to 14%. Dividends in the amount equal to or equal to the amount of dividends paid during the previous three years, taxable at a rate of 20%, will be taxed at a rate of 14% (net tax rate is 14/86 instead of the usual 20/80). In cases where the dividend recipient is a resident or non-resident individual, the withholding tax rate will be 7% (unless the tax agreement implies otherwise).
VAT in Estonia
Countries with which Estonia has entered into tax treaties
Estonia has tax agreements with the following countries: Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Czech Republic, Cyprus, Denmark, Finland, France, Georgia, Germany, Greece, Hungary, Iceland , India, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Mexico, Moldova, Netherlands, Norway, Poland, Portugal, Republic of Korea, Romania, Serbia, Singapore , Slovak Republic, Slovenia, Spain, Sweden, Switzerland, T Ailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uzbekistan and Vietnam.
Agreements are also concluded with Russia, Morocco, but they have not yet entered into force.
Reporting requirements for companies in Estonia
1. It is necessary to prepare, submit to the Commercial Register and store in the office of the company an annual financial report for the reporting period (calendar year). This document is prepared for the reporting period corresponding to the calendar year, unless otherwise specified by the charter of the company. The financial statements of Estonian companies must be submitted no later than June 30 of the year following the reporting year.
2. An audit is required if at least two of the three conditions are met:
Or at least one of the three conditions:
3. Income tax return.
In the event that during the calendar month the distribution of profits in the form of dividends was made, the tax return shall be submitted to the Estonian Tax and Customs Board no later than the 10th day of the next month. At the same time, the company must pay tax to the budget.
4. VAT tax return for companies registered with VAT. VAT returns must be submitted to the Estonian Tax and Customs Board no later than the 20th day of the following month for the past month. At the same time, the company must pay tax to the budget. If an Estonian company carries out a turnover of goods subject to VAT within the EU, it is also obliged to submit a report on the turnover of goods in the EU.