Taxes in Estonia

The Baltic Sea Region is the fastest growing business region in Europe. Trade flows between countries in the region have steadily increased every year. The Estonian tax system is considered to be one of the most liberal tax systems in the world. Estonia implemented a comprehensive tax reform in 2000 to create the simplest, most understandable and convenient tax system possible. The main advantage of Estonia is the low tax system, which can be described as a simple system with no hidden surprises and was designed to promote entrepreneurship and increase profits.

Corporate income tax
As a result of the reforms, the main benefit for entrepreneurs was the exemption from corporation tax on reinvested profits. Thus, Estonian companies are subject to income tax only on distributed profits, ie dividends. The corporation tax (tax on distributed profits) is 21% of the gross dividend.

Value Added Tax (VAT)
VAT payers are businesses whose taxable supply (excluding imports) does not exceed EUR 16 000 per the calendar year. The tax is levied on transactions in goods and services in Estonia and on imports of goods. The tax rate is 20% of the taxable amount.

Personal income tax
The tax rate for 2010 is 21% of taxable income, and residents are required to pay tax on their income earned both inside and outside Estonia. Taxable income includes income from employment (salary, wages, bonuses and other benefits), business income, interest, royalties, rent, capital gains, maintenance benefits, pensions, scholarships.

Social tax
This tax is levied to provide state pension and health insurance. It is paid by legal persons, natural persons and non-residents with regular income. The tax rate is 33% of the taxable amount. The tax must be calculated every month and the amount due must be paid no later than the tenth day of each month.

Land tax
The tax rate is between 0.1% and 2.5% of the taxable amount. The tax on land restricted to economic activities is set by the Estonian Government at 25%, 50% or 75% of the tax rate. Land tax is paid three times a year, through April 15, July 15, and October 15.