Corporate Tax in Estonia
Estonia's unique 0% corporate tax on reinvested profits
0% tax on reinvested profits. Only pay tax when distributing dividends.
How It Works
Unlike most countries that tax annual profits, Estonia only taxes distributed profits.
- Retain profits in company = 0% tax
- Reinvest in business = 0% tax
- Distribute dividends = 22/78 tax rate (~28%)
- Pay corporate expenses = tax-free
Corporate income tax is calculated using the 22/78 formula on gross distribution.[TMS §50]
Gross profit to distribute: €10,000
Corporate income tax: €2,820.51 (22/78)
Net dividend to shareholder: €7,179.49
Effective tax rate: ~28.21%
2025 Tax Rate Change
What Triggers Corporate Tax
Dividend Distributions
Any profit distribution to shareholders triggers the 22/78 corporate income tax.[TMS §50]
Fringe Benefits
Non-cash benefits to employees (company car for personal use, accommodation, etc.) are taxed as fringe benefits.[TMS §48]
Non-Business Expenses
Expenses not related to business activities (personal expenses, excessive entertainment) trigger taxation.[TMS §52]
Hidden Profit Distribution
Transactions with related parties at non-market prices are treated as hidden profit distribution.[TMS §53]
Reporting Requirements
TSD Declaration
TSD declaration monthly (if paying salaries)
Annual Report
Annual report to Commercial Register
VAT Return
VAT return monthly/quarterly (if VAT registered)
Benefits of Estonian Tax System
Keep 100% of profits for reinvestment. No annual corporate tax payments to plan for.
No complex profit calculations. Tax is only due when money leaves the company.
Compound your earnings without tax drag. Reinvest profits into marketing, hiring, or expansion.
Fully compliant with EU law. Recognized by all EU member states and OECD.
Related Calculators
Sources
- Income Tax Act (Tulumaksuseadus) — Income Tax Act
- Estonian Tax and Customs Board — Tax and Customs Board