Taxes in Estonia
Introduction to the tax system in Estonia
Taxes
Estonia offers one of the most competitive corporate tax systems in Europe. Businesses are not taxed on retained or reinvested profits – corporate income tax only applies when profits are distributed as dividends. This makes Estonia an attractive choice for startups, digital entrepreneurs, and international founders seeking a tax-efficient environment to grow their companies.
Tax rates in Estonia
Estonia is widely recognised for having one of the most competitive and transparent tax systems in Europe. Its flat-rate structure, 0% corporate income tax on retained and reinvested earnings, and minimal bureaucracy make it highly attractive for startups, digital nomads, and international business owners. Companies are only taxed when profits are distributed, encouraging long-term growth, reinvestment, and capital accumulation. Combined with Estonia’s fully digital tax administration and e-Residency programme, the country offers a uniquely efficient environment for running a global business remotely.
General taxes in Estonia
| VAT (within Estonia) | 24% |
| VAT on EU transactions and exports | 0% |
| Corporate income tax on retained profits | 0% |
| Corporate income tax on distributed profits | 22/78 |
Dividends paid out of profits that originate from a subsidiary or foreign branch may be exempt from additional taxation, provided participation exemption conditions are met.
Note: As of 2025, dividends are no longer taxed separately. All distributed profits, including dividends, are taxed at the company level using the 22/78 rate. Reduced rates and 7% withholding tax no longer apply (except under transitional rules).
Land tax in Estonia
Estonia does not impose a general property tax. Instead, only land is taxed, based on its cadastral (taxable) value. Local councils set annual rates within the following limits for 2025:
- Residential land and yard land on profit-yielding plots: between 0.1 % and 1 %
- Profit-yielding land (excluding yard land): between 0.1 % and 0.5 %
- Land with other intended uses (such as commercial or industrial): between 0.1 % and 2 %
To prevent sudden increases in tax after the latest land revaluation, a protective rule limits yearly increases to 50 % of the previous year’s tax or €20, whichever is greater.
Payroll taxes
| Personal income tax | 22 % |
| Social tax (paid by employer) | 33 % |
| Unemployment insurance (paid by employer) | 0.8 % |
| Unemployment insurance (paid by employee) | 1.6 % |
Reduced VAT rates in Estonia
Estonia applies several reduced VAT rates alongside the standard 24 % rate. These are:
- 13 % – accommodation services (including breakfast)
- 9 % – printed and digital publications such as newspapers and magazines
- 0 % – exports of goods and certain intra-EU transactions
These changes came into effect on 1 January 2025 for accommodation and publications, and the new standard rate of 24 % applied from 1 July 2025.
Taxation