Taxes in Estonia Taxes in Estonia

Taxes in Estonia

Estonia has a number of benefits that make it an ideal place to set up a company. The country has a strong economy, excellent infrastructure, and a stable political system. Additionally, Estonia is a member of the European Union, which makes it a safe and secure place to do business. This article provides a guide about taxes in Estonia and the procedures for tax returns.

Is Estonia a tax haven?

Estonia has long been known as a tax haven, as the country has one of the lowest tax rates in the world. In fact, Estonia has an income tax rate of just 20 percent, which is one of the lowest in the world. This makes Estonia an attractive destination for businesses and entrepreneurs looking to reduce their tax burden.

Types of corporate taxes in Estonia

There are three types of corporate taxes in Estonia: income taxes, value-added taxes, and social taxes. All three types of taxes are levied at the corporate level. Estonia has a lower corporate tax rate than many other European countries, but the tax system is still complex. Estonia also has a number of special features that make the tax system complicated.

Corporate income tax

Corporate income tax is the tax levied on the profits made by legal entities. The Estonian corporate income tax rate is 20%; however, there are many different deductions and tax incentives that you can claim.

Non-residents are taxed on the income they earn from Estonian sources only. How much tax they pay is influenced by any bilateral tax treaties between their home country and Estonia. Usually, income tax is withheld at the source (for example, by an employer), and non-residents don’t have to submit a tax return.

But there are some exceptions: non-residents have to declare their income themselves if it comes from the transfer of property, if they’re self-employed, or if they have a registered permanent establishment in Estonia. A non-resident entity is required to pay income tax when they have the following sources of income in Estonia:

  • Salaries paid out to a non-resident member of a controlling or management body,
  • Income gained from working or providing services,
  • Contractual investment fund interests when immovable property is involved,
  • Rental income,
  • Remuneration offered to a sportsperson or entertainer from outside Estonia for performing in Estonia,
  • Business income,
  • Pensions, scholarships and grants, and benefits,
  • Dividends taxable at a reduced rate of 14/86,
  • Gambling winnings,
  • Gains from the transfer of property,
  • Whenever a resident insurance company, Estonian Unemployment Insurance Fund, or the Estonian Health Insurance Fund pays out insurance indemnities from Estonian pension funds to a non-resident entity or company,
  • Payments made to a non-resident entity from pension funds in Estonia.


The value-added tax (VAT) is a type of tax that is levied on the value added by a business. The tax is based on a percentage of the value of the goods or services that are sold. The rate is currently 20%. VAT is paid by the business that sells the goods or services, not the business that originated the goods or services. For companies with an annual taxable turnover below €40,000, there is no obligation to register for VAT in Estonia.

Social tax

Social taxes in Estonia are paid by companies to fund social programs. The three types of social taxes that are levied in Estonia are the unemployment insurance contributions tax, the health insurance contributions tax, and the workers’ compensation insurance contributions tax. These taxes are paid by the company, not the individual employee.


If you are a non-resident natural person, you may be able to reduce the rate of income tax (0% or 5%) that is subject to withholding by submitting a tax agreement and residence certificate to the Estonian Tax and Customs Board. To do this, you must also be personally identified and declared in accordance with income tax regulations.

It is imperative that a foreign company determines whether the nominee account that contains securities from which dividends are paid belongs to a natural person or a legal person to qualify for a lower tax rate on dividends. In Estonia, income tax is not levied on the profit earned every year. Income tax is levied on a monthly basis only when profits have been distributed (for example, when dividends are paid out). In general, the tax rate in Estonia is 20%, calculated at the rate of 20/80 from the taxable net payment.

Salary taxation

Taxes in Estonia to be paid by non-resident companies on paid-out salaries include:

  • Salaries paid out to a non-resident member of a controlling or management body,
  • Remuneration offered to a sportsperson or entertainer from outside Estonia for performing in Estonia.

Does Estonia have a tax identification number?

There is no company tax ID in Estonia – all you need is your 8-digit company registration code and 11-digit personal identity code (isikukood) for all institutions and services in Estonia. If you’re asked for your unique taxpayer number (TIN) elsewhere in the world, then your registration code is all you need. VAT registration numbers are also not mandatory in Estonia (unless your company has exceeded certain thresholds), so you shouldn’t need one to access any service inside or outside of the country.

How to declare taxes in Estonia

The income tax return for non-residents and investment funds for the year 2022 on which no income tax has been withheld is filed using Form A1. When it comes to filing your return, you’ll need to use Form E1 for your business structure. As a non-resident or investment fund, you are required to file an income tax return if you have gained property in Estonia during the 2022 fiscal year. Form V1 must be filled out and submitted in order to avoid any penalties. Estonia has one of the lowest income tax rates in the world, at just 20%. This makes it an attractive place to set up a business, and it has been ranked as one of the best countries in the world to do business by Forbes magazine.

Launch your business in Estonia with Workhy

Workhy provides company formation services for entrepreneurs from all over the world, enabling them to establish companies online without having to travel to Estonia. Workhy also provides additional services, including monthly accounting, managing financial processes, applying for VAT & EORI & IOSS, providing registered business addresses, and opening online bank accounts.

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