Estonian corporate income tax: the rate and how it works

How does Estonian corporate income tax work?

An Estonian company pays corporate income tax when it distributes profit, not when it earns it. Profit that stays in the company — reinvested or simply kept — is taxed at 0%.

The tax arises only when profit leaves the company, as a dividend or in another form.

Only the last step is taxed. An OÜ that keeps reinvesting its profit — in staff, stock, equipment or a second product — pays no corporate income tax on it, for as long as the money stays in the business.

That changes how a young company grows. Every euro of profit can go back into the business whole, and the tax decision moves to the moment you choose to take money out. Most of this guide is about that moment: what counts as taking profit out, how the tax on it is counted, and when it is paid.

It also means the tax is deferred, not removed. Profit kept for years is taxed in the month it is finally paid out, at the rate that applies then.

What is the corporate tax rate in Estonia?

The corporate tax rate in Estonia is 22% of the gross amount of a payout — the payout plus the tax on it. Counted from the payout itself, the same tax is 22/78 of it, about 28.21%.

The Income Tax Act counts it that way round: it starts from the sum actually paid out.

Both captions describe the same euros. 22% and 28.21% are not two taxes, or two rates to choose between: they are one tax measured against two different amounts. Budget 22% of the payout and you will come up short — and the gap grows with every euro you pay out.

Read the first row from the right: the tax is 22% of what leaves the company, and 22/78 of the payout. The second row runs the other way — from a sum of profit to the largest payout it can fund once the tax is paid.

Your own amounts, from either end, are one step away in the dividend tax calculator.

What counts as taking profit out?

In Estonia a dividend is only one way profit leaves a company: payments from equity above what the shareholders put in, gifts and donations above set limits, fringe benefits and expenses unrelated to the business are taxed too.

A shareholder loan or an off-market related-party deal can be taxed as well; the company declares all of them on form TSD.

• Dividends

  The usual way, decided by the shareholders.

• Payments from equity

  A share capital reduction, a buy-back or another payment out of equity — on the part above the money and assets the shareholders put in.

• A loan to a shareholder

  When the circumstances of the deal indicate it may be a hidden profit distribution.

• An off-market deal with a related person

  Tax on what the company would have earned, or not spent, at the market price.

• Gifts, donations and entertaining

  Above the tax-free limits, at the same 22/78 as a dividend. Small promotional gifts, a modest monthly sum for hosting guests and donations to listed non-profits within a cap stay untaxed.

• Fringe benefits

  Benefits given in kind rather than as pay — with social tax on top of the income tax.

• Expenses unrelated to the business

  Taxed in Estonia wherever the company operates, unless a country where it has a permanent establishment has already taxed them as part of its profit.

The list is not closed. EMTA’s own summary of what goes on form TSD — salary, board member fees, rental fees, royalties, fringe benefits, gifts, donations, expenses unrelated to the business, distributions from equity — ends with “etc.”

The loan and the price rules look at the circumstances and the market value of a deal, not at what it is called. A payment that moves value from the company to you, or to a person related to you, is worth a question before it is made rather than after.

When is the tax declared and paid?

An Estonian company declares corporate income tax on form TSD and pays it by the 10th of the month after the month it pays out the profit.

It is the same form and the same deadline as the payroll taxes on salaries, so a payout in March is declared and paid by the 10th of April.

1. The shareholders decide

   A dividend rests on an approved annual report and a shareholders’ resolution — the conditions are in the next section.

2. The company pays out

   The month of the payment is the month the tax belongs to — not the month of the decision, and not the year the profit was earned.

3. Form TSD by the 10th

   The company declares the payout and the tax on it by the 10th of the following month.

4. The tax is paid

   By the same day. A deadline that falls on a holiday moves to the next working day.

Each payout is settled in the month after it is made, so the cost of a decision shows up straight away — not at the end of the year, when it is too late to change.

Every TSD date of the year is in the tax calendar for an Estonian OÜ, with a file to add them to your own calendar.

When may an Estonian OÜ pay a dividend?

An Estonian OÜ may pay a dividend on three main conditions of § 157 of the Commercial Code: an approved annual report shows profit to pay it from, net assets cover share capital and non-distributable reserves, and the shareholders approve it.

The payout itself must not take net assets below that line.

• An approved annual report

  The dividend comes out of the year’s net profit, or out of profit kept from earlier years less earlier losses, as that report shows.

• Net assets that hold

  In the last approved annual report they are not, and the payout would not make them, less than share capital plus the reserves that can’t be paid out.

• A shareholders’ resolution

  The shareholders decide the dividend; the board pays it.

Get one wrong and the money may have to come back: a shareholder who received a dividend without a basis may have to return it, and the board members who caused the payment are jointly liable for its return.

The approved report is the first gate, which makes the annual report more than a formality: without one, no dividend is paid at all. What happens when that report is late is in the annual report guide.

Do you pay more tax in Estonia on your dividend?

If you are a natural person, no. Once an Estonian company has paid corporate income tax on an ordinary dividend at 22/78, Estonia withholds nothing more from the dividend paid to you.

The country where you are tax resident applies its own rules to that income — that part is yours to check.

EMTA adds a warning worth reading twice: in most cases an e-resident can’t use the company’s Estonian tax for double-tax relief at home, because that tax was paid by a different person — the company, not you.

One narrow exception survives from the old rules. A company passing on a dividend it received that was taxed under the reduced rate repealed from 1 January 2025 withholds 7% when it pays that dividend on to a natural person — and only up to the unused balance of it. Profit your own company earned and kept never qualifies.

Where you are tax resident is a question of its own, and the e-Residency and tax residency guide takes it step by step.

Dividend, salary or board fee — what changes?

A dividend from an Estonian company carries corporate income tax of 22% of the gross amount, and Estonia withholds nothing more from a natural person.

A salary carries payroll taxes instead — income tax, social tax, unemployment insurance and the II pillar — declared on form TSD by the 10th of the next month.

A management board member fee is a payment of its own, and the company declares it on form TSD for the month it is paid. Which taxes apply to it depends on the board member’s situation — worth settling before the first payment, not after.

Which mix costs less isn’t a question of rates alone: it depends on the amounts, on who receives them and where they are tax resident. Run the same sum through the net salary calculator and the dividend tax calculator, and compare what reaches you with what leaves the company.

What isn’t true about Estonian corporate tax?

Three claims about Estonian corporate income tax are out of date or wrong: a reduced rate for regular dividends, a security tax on company profit, and a tax-free system.

In fact, that reduced rate is gone, no such tax is charged, and profit pays 22% of the gross amount when it leaves the company.

Does it matter where the company is run from?

Yes. An Estonian company run from another country may also be taxed there: EMTA says a company an e-resident manages from abroad will probably have a permanent establishment in that country, which then taxes the profit earned through it.

Business carried on only abroad is taxed abroad, and Estonia prevents double taxation.

Where there is a permanent establishment, the tax treaty between the two countries decides how that profit is taxed. EMTA is explicit that e-Residency gives no automatic exemption from tax abroad — and expenses unrelated to the business stay taxable in Estonia unless the other country has already taxed them as part of the profit.

So the 0% on kept profit is Estonia’s rule, not a promise about anywhere else. If you live in another country and run the company from there, check that country’s rules before you plan around the Estonian model — what e-Residency does and doesn’t change is the place to start.

Questions about corporate income tax