Europe · OÜ
Estonia company taxes
Estonia's corporate tax system is genuinely different from almost everywhere else, and it is the whole reason founders choose it. Retained and reinvested profit is taxed at 0% — there is no annual tax on undistributed earnings at all. Corporate income tax only becomes due when the company distributes profit (or makes a deemed distribution such as a fringe benefit, a non-business expense, a gift or a transfer-pricing adjustment). For a founder who plows earnings back into the business, that means the company can compound capital with zero corporate tax for years. The catch arrives at payout. When you distribute a dividend, the company — not the shareholder — pays corporate income tax of 22%, calculated as 22/78 of the net amount: distribute €78 and the company owes €22 in tax on top, so €100 of pre-tax profit leaves the company. From 1 January 2025 the standard rate rose from 20% to 22% and the old reduced 14/86 rate for 'regularly distributed' dividends was abolished, so there is now a single 22/78 rate. Importantly, Estonia treats this charge as corporate income tax, not a withholding tax, so a tax treaty does not reduce it — though it also means there is generally no further Estonian withholding on the dividend itself when it reaches a non-resident shareholder.
- Country
- Estonia
- Topic
- Taxes
- Reviewed
- June 2026
By the Lanzamo Editorial Team · Reviewed June 2026 · How we research
| Tax | Rate | Notes |
|---|---|---|
| Corporate income tax — retained profit | 0% | No tax on undistributed/reinvested profits; the charge is deferred until distribution. |
| Corporate income tax — distributed profit | 22% (22/78) | Levied on the company at payout as 22/78 of the net distribution; €78 net costs €22 in tax. Standard rate since 1 Jan 2025. |
| VAT — standard rate | 24% | Raised from 22% on 1 July 2025. Reduced 9%/13% and 0% categories exist. Registration threshold €40,000 of taxable turnover for an Estonian-established OÜ. |
| Withholding tax — dividends | 0% | No separate Estonian WHT on dividends to non-residents; the 22/78 corporate tax is paid by the company at distribution instead. |
| Personal income tax (salary/board fee) | 22% | Flat 22% from 2025. Salary to a non-resident for work done abroad is generally taxed in the worker's home country, not Estonia. |
| Social tax on Estonian salary | 33% | Employer social tax on salaries paid to Estonian-taxable workers; usually not triggered for a non-resident founder taking dividends instead of salary. |
The deferral model: 0% until you distribute
An Estonian OÜ pays no corporate income tax on profit it keeps inside the company — active trading income, interest, capital gains, all of it can accumulate tax-free as long as it is retained. There is no annual corporate tax return on undistributed profit and nothing to compute on the balance-sheet earnings each year. Tax is triggered only by a distribution event, so the system effectively gives every reinvesting company an automatic, indefinite deferral. For a non-resident running a lean, growth-focused business that doesn't need to extract cash, this is the core advantage over a flat-rate corporate tax country.
How distributions are actually taxed (22/78)
When the company resolves to pay a dividend, it pays corporate income tax of 22% computed as 22/78 of the net distribution. The arithmetic: €100 of pre-tax profit splits into €78 paid out to the shareholder and €22 of tax to EMTA. The company declares this on form TSD Annex 7 and pays by the 10th day of the month following the payout. Since 1 January 2025 the reduced 14/86 rate for regularly distributed dividends has been abolished, so there is one uniform 22/78 rate regardless of distribution history. Deemed distributions — fringe benefits, gifts, non-business expenses, excessive expense payments — are taxed on the same 22/78 basis, which is why careful bookkeeping matters.
Dividends and withholding for foreign owners
Estonia is clean at the shareholder end: because the 22% is charged to the company as corporate income tax at distribution, there is generally no additional Estonian withholding tax when the dividend is paid out to a non-resident shareholder. The flip side is that, since this is corporate tax rather than withholding tax, a double-tax treaty cannot reduce the 22/78 charge the company pays. Your home country may still tax the dividend you receive, and you may be able to credit the Estonian corporate tax depending on local rules — coordinate with a tax adviser where you live before assuming the dividend is tax-free in your hands.
How a non-resident-owned company is taxed
An OÜ is an Estonian-resident company and is taxed under the Estonian distribution-based system regardless of where its owner lives — being non-resident does not change the company's tax base. The two cross-border risks to watch are separate from the company's Estonian tax. First, e-Residency gives you no personal tax residency, so your own income is taxed where you actually live. Second, if the company is genuinely managed and controlled from your home country, that country may treat the OÜ as tax-resident there too, or as having a permanent establishment, creating a competing claim. For a clean setup, keep substance light and aligned, and take local advice on management-and-control.
VAT, salary tax and incentives
Standard VAT is 24% (since 1 July 2025), with an Estonian-established OÜ registering once taxable turnover passes €40,000 in a calendar year — many B2B founders register voluntarily earlier to reclaim input VAT. There is no special holiday or incentive scheme layered on top of the corporate system, because the 0%-on-retained-profit model is itself the incentive. If you pay yourself a salary as an Estonian-taxable worker it attracts 22% income tax plus 33% employer social tax; a non-resident founder doing the work from abroad is generally taxed on that salary at home, not in Estonia, which is why many take profit as dividends instead.
Filing calendar
The rhythm is light if you reinvest. Monthly: a TSD return (combined income and social tax) is due by the 10th, but only in months where you make a taxable payment such as a salary, board fee or dividend; a VAT return (form KMD) is due by the 20th if you are VAT-registered. Annually: one annual report must be filed with the e-Business Register within six months of the financial year-end — by 30 June for a calendar-year company — and it is mandatory even for a dormant OÜ. There is no separate annual corporate-tax return on retained profit. Missing the annual report risks fines up to €3,200 and eventual deletion from the register.
Frequently asked questions
Is it true an Estonian company pays no corporate tax?
Only on retained profit. An OÜ pays 0% on profit it keeps and reinvests, with no annual tax on undistributed earnings. Corporate income tax of 22% (as 22/78) applies when you distribute a dividend or make a deemed distribution. So 'no tax' is accurate while you reinvest, but the tax arrives at payout.
Does Estonia withhold tax when my company pays me a dividend abroad?
There is generally no separate Estonian withholding tax on the dividend itself, because the 22% is charged to the company as corporate income tax at the moment of distribution. The downside is that, being corporate tax rather than withholding tax, a treaty cannot reduce it. Your own country may still tax the dividend you receive, so check local rules.
Do I have to register for VAT, and at what rate?
An Estonian-established OÜ must register for VAT once taxable turnover exceeds €40,000 in a calendar year, and may register voluntarily before that. The standard rate is 24% since 1 July 2025. Many B2B founders register early to reclaim input VAT and issue valid EU VAT invoices even while below the threshold.
If I never pay myself, do I have to file anything?
Yes — even a profit-reinvesting OÜ must file one annual report with the e-Business Register each year (by 30 June for a calendar-year company), and this applies even to a dormant company. But you may have no monthly TSD or VAT filings at all if you make no taxable payments and aren't VAT-registered, which is why the ongoing admin can be genuinely light.
Sources
- e-Business Register — Company Registration Portal (official registry)
- Estonian Tax and Customs Board (EMTA) — taxation of dividends
- e-Residency — corporate taxes in Estonia (0% retained / 22% distributed)
- Invest in Estonia — private limited company (OÜ), €0.01 capital, contact person
- Invest in Estonia — corporate income tax (22/78, VAT 24%)
- PwC Tax Summaries — Estonia corporate taxes on income (22/78, 14/86 abolished)
- Politsei (Police and Border Guard Board) — e-Resident's digital ID state fee (€150)
- e-Residency — business banking options for e-residents
- PwC Tax Summaries — Estonia other taxes (VAT 24%, €40k threshold)
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