Setup your Business in Estonia
Establishment of a Business in Estonia
Estonian tax system consists of national taxes and local taxes collected by local governments in their jurisdiction. National taxes include income tax, social tax, land tax, gambling tax, value-added tax, duty and excise taxes and heavy goods vehicle tax. Local governments have the authority to impose local taxes, but effectively only a few have introduced local taxes, in particular: boat tax, advertisement tax, tax for closing of streets, motor vehicle tax, tax on keeping domestic animals, amusement tax, and parking fees.
Estonia does not impose any gift, inheritance or estate taxes. Various transactions may be subject to payment of state fees (stamp duties).
Corporate income tax
Estonian resident companies and permanent establishments of the foreign entities (including branches) are subject to income tax only in respect of all distributed profits (both actual and deemed), including:
Corporate profits distributed in the tax period;
Gifts, donations and representation expenses;
Expenses and payments not related to business.
All distributions are subject to income tax at the rate of 20% of the amount of taxable payment. The transfer of assets of the permanent establishment to its head office or to other companies is also treated like a distribution. As of 1 January 2009, dividends paid to non-residents are no longer subject to withholding tax at the general rate of 20%, irrespective of participation in the share capital of the distributing Estonian company. However, various withholding taxes may still apply to other payments to non-residents if they do not have a permanent establishment in Estonia or unless the tax treaties otherwise provide.
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.
Value added tax (VAT) – known in Estonian as “käibemaks”
The standard 20% rate applies to all supplies of goods and services not qualifying for a reduced 9% rate or exemption. A reduced rate applies to accommodation, books, certain periodicals, listed pharmaceutical products and medical devices. The VAT rate on the export of goods, intra- Community supply of goods and certain services is 0% (i.e. exemption with credit).
Tax rates in Estonia:
Income of the year 2016 – 20% (Period of taxation for natural persons is a calendar year)
Corporate income tax rate on distribution in the year 2016 – 20/80 of the net amount (equals to 20% of gross profit)
We can help with following services in Estonia:
We provide following services in Estonia through our affiliates, which are fully authorised agent of Estonian Tax and Customs Board:
Business start-up advice
Bookkeeping and bank reconciliations
Fully outsourced accounts department
Payroll support or fully outsourced payroll managed by us
Tax returns for companies and individuals
VAT refund and payments
Double taxations reliefs
Taxation advice for individuals
Specialist corporation tax services
Property and land transactions planning
Business development and consultancy
Compliance services with local tax authorities
Other taxes in Estonia
Land tax is levied on the taxable value of all land (other than that which is specifically exempt) based on an official valuation. The owners of the land are liable to land tax. The annual land tax rate varies between 0.1% and 2.5% of the assessed value of the land. The council of the local authority is authorised to establish the rate of land tax.
Excise duties are levied on tobacco, alcoholic beverages, fuel, electricity and packages.
Heavy goods vehicle tax is paid for the following classes of vehicles which are intended for the carriage of goods: lorries with a maximum authorised weight or gross laden weight of not less than 12 tons; road trains composed of trucks and trailers with a maximum authorised weight or gross laden weight of not less than 12 tons.
Gambling tax is imposed on amounts received from operating games of skill, totalizator, betting and lotteries. Tax is charged also on gambling tables and machines used for games of chance located on licensed premises.