Taxes in Estonia

Estonia has flexible taxation system and it attracts many foreign investments. The taxation law regulates Estonian taxation system.

Income tax

Estonia – the unique country in Europe where there is no tax on reinvested profit. The income tax which constitutes 21%, arises at the entity in three main cases:

  • In case of dividend payout;
  • In case of implementation of expenses of the entity which haven’t been connected with activities;
  • In case of purchase of services from the entities which were registered on the territory with the low tax rate (offshore).

The profit tax or the income tax from the entity is regulated by the Estonian Republic income tax act.

Receipts tax

The receipts tax in Estonia constitutes 20%, it is rather high therefore many foreign entrepreneurs that have organized production in Estonia, prefer to sell their products to export or to the European Union countries. In such cases the receipts tax equals 0.

For beginning entrepreneurs there is a border of an annual turnover below which the entity isn’t obliged to charge and pay the receipts tax. Today this border constitutes 16000 euros. I.e. if the firm didn’t gather this turnover within a year, it remains non-taxable for a next year.

The requirement for paying RT arises on 20th day of the next month after emergence of turnover.

The receipts tax is regulated by the receipts tax Law of the Estonian Republic.

Taxes on a salary of workers

In Estonia there are taxes, which are withheld from a pay of the worker, and taxes, which are accrued for a salary of the worker.

The taxes that are withheld from a salary (i.e. expenses of the worker):

  • Income – 21%
  • Pension – 2%
  • Unemployment insurance – 2%

The taxes that are accrued for a salary (i.e. expenses of the employer):

  • Social – 33%
  • Unemployment insurance – 1%

Despite the fact that Estonia has high taxes for a salary, after all foreign entrepreneurs are interested in creating new workplaces. It is connected to a fact, that there is a low average salary in the country and readiness of good specialists to work for small money.

Statistical data shows that today the average salary in Estonia constitutes 850 euros, a minimum wage – 320 euros.

The requirement for payment of taxes on a salary arises on 10th day of the next month after the actual payment to the worker.

List of the other national taxes in Estonia:

  • land tax;
  • tax on gambling;
  • customs fee;
  • excises (on tobacco, alcohol and liquid fuel);
  • tax on heavy vehicle.

The fiscal duties are made by Tax and customs department of Estonia. In case of untimely payment of taxes, Tax department charges a penalty fee in the amount of 0,06% a day.

Consultation on the transaction taxation (without preliminary preparation) 50 euros/ hour
Consultation on the transaction taxation (with preliminary research of a situation) 80 euros/ hour
The transaction analysis (written) from the point of view of the taxation 200 euros

The receipts tax isn’t included in the cost of services.