The uniqueness of the Estonian tax system lies in the absence of corporate income tax. More precisely, it is formally there, but it is 0%. This certainly distinguishes Estonian firms from those in other European jurisdictions and makes them essentially onshore.

If you do not sell goods or services on the territory of Estonia, to individuals in the EU or to companies in the EU without a VAT number, then you have VAT at the rate of 0%. If you do not pay a salary to a local (Estonian) resident worker, then you also do not have taxes on this basis. There is no obligation to pay a salary to a member of the board of an Estonian company, and if you do not distribute the accumulated profits, then you again have no taxes!

More about income tax

Since 2000, Estonia has introduced a zero tax rate on corporate income. This applies only to the profit received by the company, i.e., undistributed. If shareholders or shareholders (owners) decide to distribute profits in the form of dividends, then the company pays for shareholders only income tax at a rate of 20/80, i.e. 20% For example, if 10,000 euros of earned profit is distributed, 2,000 euros will be taxes and 8,000 net income for the shareholder.

From January 1, 2018, there is a reduced tax rate on dividends paid (starting from the 3rd year of regular payments) and is equal to 14%.

More about VAT

VAT, VAT and VAT are equivalent concepts in Estonia and it is equal to 20%. Value added tax is imposed on the sale of goods and the provision of services by way of business in Estonia, as well as the import of goods and services into Estonia. In some cases, the turnover tax rate is 9% (books, medicines, tickets to concerts or performances) or 0% (export of goods and services from Estonia). If an entrepreneur provides services or sells goods outside Estonia, they are not subject to value added tax. Also, the value added tax is not applied in the case of the sale of goods in the customs territory or in the territory of the European Union.

If an Estonian company has a VAT number:

VAT rates

When the rate applies

20%

Your company in Estonia sells goods and services in Estonia, in the EU to individuals or companies that do not have a VAT number.

9%

Your company in Estonia sells textbooks, medicines and accommodation services in Estonia to companies that do not have a VAT number and to individuals in the EU.

0%

Your company in Estonia sells goods and services to companies in the EU that have a VAT number, or to companies and individuals in another territory (outside the EU).

VAT payer registration

As of 01.05.2004, the Customs and Tax Board registers as VAT payers only those companies that conduct business (after the annual turnover of 40,000 euros) in Estonia or prove its start before reaching a turnover of 40,000 euros.
If a new or acquired company starts operating immediately, the new management board can register it as taxable without waiting for an annual turnover of 40,000 euros. It usually takes 2 to 5 days to register as a value added tax payer.
Read more about the possibility of obtaining a VAT number on this page.

Audit:

at least two of the above indicators exceed the following conditions:

sales income or income of EUR 4,000,000;
property as of the balance sheet date 2,000,000 euros;
the average number of employees is 50 people;
or at least one of the annual indicators shown in the financial statement exceeds the following conditions:

sales income or income of EUR 12,000,000;
property at the balance sheet date 6,000,000 euros;
the average number of employees is 180 people.

Audit Review:

at least two of the indicators exceed the following conditions:

sales income or income of EUR 1,600,000;
property at the balance sheet date 800,000 euros;
the average number of employees is 24 people;
or at least one of the specified indicators exceeds the following conditions:

sales income or income of EUR 4,800,000;
property at the balance sheet date 2,400,000 euros;
the average number of employees is 72 people.

Reporting is provided to the following state bodies:

• Estonian Tax Board, if the Estonian company has a VAT number or employees receiving wages. Reports are submitted monthly: by the 10th – on income and social taxes and by the 20th – on turnover tax.
• If an Estonian company has a turnover in the EU, then a monthly report on the turnover of goods within the EU is submitted by the 20th.
  Estonian commercial register.
• Annually, from January 1 to June 30, an Estonian company must submit in the prescribed form a financial report on its activities for the previous financial year (usually from 01.01 to 31.12).