Tax Policy

Tax

Rate

Income tax

20%

Dividends 20% / 14%

Value added tax

20%

Social tax

33%

Unemployment insurance (employer)

0,8%

Unemployment insurance (employee)

1,6%

Mandatory pension insurance

2% - 3%

Royalties

0% - 10%

Income Tax

Personal and corporate income tax rates are both 20%.

Estonia levies corporate income tax only on profits that are distributed as dividends, share buy-backs, capital reductions, liquidation proceeds or deemed profit distributions.

As of 2018, a lower corporate income tax rate of 14% applies to the amount of distributable profits which is less or equal to the average of distributed amounts of the last three years for which the resident company paid income tax in Estonia. Such lower tax rate applies only at company level, profits distributed to natural persons will be subject to additional 7% income tax. see more

Starting from 2018 the 14% is applied as follows:

  • In 2019, the 14% rate will be applied to 1/3 of the profits distributed in 2018
  • In 2020 a 14% rate will be applied to 1/3 of the profits distributed between 2018 and 2019
  • In 2021 14% rate will be applied to 1/3 of the average of profits distributed over the last three years

All undistributed corporate profits are tax-exempt providing corporate reinvestments at a 0% tax rate.

 

Value Added Tax (VAT)

Value added tax applies to supplies of goods and services in the course of business activities. The standard rate for VAT in Estonia is 20% of the taxable value of goods or service.

It is required that a company is registered as a person liable to value added tax if the company’s taxable turnover exceeds EUR 40 000.

Exceptionally there are also 9% and 0% rates applied.

Labour costs

Minimum gross salary of an employee in Estonia is EUR 500 and EUR 2,97 on an hourly basis.

The social tax rate is 33% which is paid on a monthly basis. In addition to previous the employer is also liable for the partial unemployment insurance payment which is 0,8 %.

According to the law the member of the management board is not subject to remuneration.

 

Remuneration taxes

The employee shall withhold the following taxes from the employees gross wage:

  • Income tax at a rate of 20% (As of 2018 the basic exemption is up to EUR 6000 per year and up to EUR 500 per month)

  • Employee’s unemployment insurance tax at a rate of 1,6%

  • Mandatory pension insurance at a rate of 2% or 3% depending on the pension pillar.

 

Other applicable taxes

Land tax; Gambling tax; Heavy goods vehicle tax; Excise duties, such as alcohol, tobacco, energy, packaging.

For detailed information please contact us via info@gatetobaltics.com, by telephone +372 663 1216 or fill in our contact form.