Understanding Estonian Taxation for Business Owners

Mar 1, 2023 | Accounting, Business, Estonia

If you want to start a business in Estonia, it’s important to understand the country’s tax system. Estonia has a relatively simple and favorable tax system, which is one of the reasons why it’s a popular destination for entrepreneurs. Below is what you need to know about the Estonian tax system as an entrepreneur.

Corporate tax

Estonia has a apartment corporate income tax rate of 20%. However, companies only have to pay tax on distributed profits. This means that if the profits are reinvested in the company, no tax is due. In addition, dividends distributed to shareholders aren’t subject to additional tax.

Value Added Tax (VAT)

In Estonia, VAT is levied on the supply of goods and services. The standard rate is 20%, but there are reduced rates of 9% and 0% for certain goods and services. Companies with an annual turnover of more than €40,000 must register for VAT.

Personal income tax

Employees in Estonia are subject to personal income tax, which is withheld by the employer. The tax rate is progressive and ranges from 20% to 33%. There is also a social tax, which is paid by the employer and amounts to 33% of the employee’s gross salary.

Other taxes and duties

In addition to the above taxes, there are other taxes and fees that companies may be required to pay. These include property tax, motor vehicle tax and customs duties.

Annual reporting

All companies in Estonia are required to submit annual reports to the tax authorities. The deadline for submitting tax returns is six months after the end of the fiscal year following the tax year.

In summary, taxation in Estonia is relatively simple and beneficial for business owners. However, it’s important that you comply with all relevant tax regulations and file your tax returns on time. By working with an experienced tax advisor, you can ensure that you meet your tax obligations and take advantage of all available tax benefits.

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