Estonia has made a lot of effort to establish a very efficient taxation system, which is the reason why entrepreneurs from all over the world consider it a tax haven and flock here to reap the fruits of its labor. You will not have to pay corporate, capital gains, or reinvested profit taxes, and real estate and land taxes are very low. You can set up a company in Estonia and use it as a financial center of your holding company. Estonia has minimized the red tape and enjoys a very high reputation in the world.
If you want to read a more detailed account of the taxation system in Estonia, we invite you to our portal where we concentrate on international business and banking, tax optimization, investment, and related issues. Our specialists keep track of all the latest changes in the market and write articles that will help you take advantage of profitable offers.
If you need professional help in company setup, business or personal account creation, or tax optimization, follow the link and book an initial free session with our experts. You will discuss all the issues and decide whether you need any professional help. And if you decide to delegate all the administrative steps to us, we will be happy to assist at a reasonable fee.
Taxes in Estonia
Estonian taxes are subdivided into governmental and local ones, just like in many other countries. Let’s take a look at each category.
- Income tax amounts to 20%, and it is payable on all income except for dividends.
- Social tax rate equals 33% and is payable by companies that carry out their activities in Estonia (this includes local representative offices of non-residents). The rate is composed of pension insurance (20%) and medical insurance (13%).
- Unemployment insurance contributions are made at a rate of 1% (for employers) and 2% (for employees), and they are based on the amount of salary or remuneration for the services provided by an individual.
- The land tax rate ranges between 0.1% and 2.5%. It is based on the assessment value and depends on the municipality. It should be paid by landowners before March 31 and October 1 (that is, in two payments). If the amount is less than 64 euros, it is not divided and is payable on March 31. If the land is occupied by a house, no land tax is payable.
- The VAT rate may equal 0%, 9%, or 20%. 20% is the standard rate applicable in most cases. If we are talking about magazines, books, and newspapers, hotel accommodation, and pharmaceutical drugs, the applicable rate is 9%. Some services are subject to a zero VAT rate (insurance, some financial operations/operations with securities, or healthcare services).
- The lottery and gambling tax rate ranges between 5% and 18% depending on the type of game. It is payable by an authorized operator every month.
- The customs duties payable depend on the products and services, as well as the country. As Estonia is an EU country, it applies the conditions of the Customs Union: it has duty-free trade with all EU states. However, if the products are imported from non-EU countries, they are subject to the rates established by EU documents. If there are free-trade agreements between the EU and other countries, Estonia is a party to them.
- The excise duty depends on the product, and it is levied if you import fuel, electricity, alcohol, tobacco, and some packaging material.
- The tax on heavy-weight transport (whose weight exceeds 12 tons) ranges between zero and 232 euros per vehicle and is paid every quarter.
The local taxes are the responsibility of the regional and city councils, and they are set by the law “On Local Taxes.” They form a minor part of the budget, so they are not used very often.
Here is a list of local taxes that may be imposed:
- Advertising tax (payable by individuals and legal entities that place their advertisements in public spaces).
- Roads and streets closure tax (if the streets and roads are closed on a temporary basis to hold events, this tax may be applicable).
- Motor vehicles tax (it is imposed on the owners of motor vehicles that are registered in Estonia).
- Pet tax (as you may guess from the name, it is payable by pet owners).
- Entertainment tax (it is payable for taking part in entertainment events, such as concerts, theatrical performances, and so on).
- Parking tax (if you use parking spaces in specially designated areas, you will be liable for this tax).
If we look at the current situation, motor vehicle, pet, or entertainment taxes are not levied in any Estonian municipality.
Business in Estonia In A Nutshell
- 100% foreign ownership by an individual or legal entity is allowed
- Two legal forms are mainly used: LLC (minimum authorized capital is 2,500 euros) and JSC (minimum authorized capital is 25,000 euros, and at least one director is required)
- All reports are filed electronically
- Financial reports are filed on a mandatory basis. If you have a joint-stock company or a partnership, they also need to be audited.
- There is no currency control in the country.
- Anti-money-laundering regulations are very strict. It means that if you work with offshore companies and receive large amounts of money, these may be frozen until their legal origin is proven.
Business in Estonia: Advantages
Let’s take a look at the benefits offered to entrepreneurs who start their business in Estonia:
- You can establish a company in Estonia online in a matter of several days.
- The country is a leader in the e-government and cybersecurity sphere.
- Companies pay no tax on the profits they reinvest in the business.
- Enjoy Estonian banking with its state-of-the-industry technologies and various financial services.
- The country’s economy is stable, and the unemployment rate is low.
- The laws in Estonia are very transparent and predictable, and they are focused on business support.
- Local and foreign companies enjoy equal treatment.
- Estonia is an EU member, which makes it possible to easily expand your business to Europe.
- Benefit from the country’s top-notch infrastructure, including excellent highways, high-speed telecommunication networks, busy airports and seaports.
Want to launch your ambitious European undertaking in Estonia? Follow the above link to discover more details and book a free session with our experts to ask your questions. The professional help is near!