Corporate income tax in Estonia
Corporate income tax in Estonia is paid by domestic companies – residents, permanent establishments of non-residents that perform economic activity in the country (including branches) and non-residents acting as employers in Estonia.
Taxable objects in Estonia
Corporate income tax in Estonia is applied to the following:
- corporate profits distributed in the tax period;
- gifts, donations and representation expenses;
- expenses and payments not related to business
- fringe benefits (taxable at the level of employer)
The transfer of assets of the permanent establishment to its head office or to other companies is also treated like a distribution.
Tax rate and taxation on dividends in Estonia
Corporate income tax rate in Estonia is 25% to net payments. Tax is calculated of the net payment. Tax from profit distribution is withheld by the legal person. For the recipient, dividends are not taxable income and additional income tax is not withheld on the amount of dividends.
Redistribution of dividends is not taxed:
- Dividends received from subsidiary domiciled in the EEA Member State or Switzerland (except low tax jurisdictions) – are not taxed with income tax if at least 10% of the shares or votes in the subsidiary is held by Estonian company.
- Dividends received from subsidiary domiciled in another country (outside of EEA Member States and Switzerland, except low tax jurisdictions) – are not taxed with income tax if at least 10% of the shares or votes in the subsidiary is held by Estonian company and if income tax has been withheld or paid.
Taxation of payments to non-residents
In Estonia income tax is withhold on following payments made to non-residents:
- rental payments – 20%;
- fees for services provided in Estonia – 10%;
- royalties – 10% and 0% (royalty payments are exempt from tax if the recipient is an associated company of the paying company and is resident in another EU Member State or Switzerland or this company’s permanent resident is in another EU Member State or Switzerland)
- interests – No income tax on interests. Exception is when non-resident investor derives interest from Estonian fund or other pool of assets.
One must take into account that under tax treaties these tax rates may be reduced.
To find out more about corporate income tax in Estonia, please contact our solicitors and tax consultants at firstname.lastname@example.org.
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