While embarking on a business journey in Estonia is exciting, you cannot forget about the importance of having your taxes taken care of in the correct manner. It is no secret that Estonia can be a good place to have a business due to the fair tax rates and the 0% tax incentive to keep investing in your business. However, when you are coming from a foreign country with new jurisdictions can be a challenge in the beginning and is the biggest reason why many entrepreneurs turn to us in search of tax advice related to their Estonian company.
Overview of tax rates in Estonia 2022
To give you a basic understanding of the tax rates that apply in the bigger picture, we have put together of some of the most important rates any entrepreneur doing business in Estonia should know.
- The withholding income tax rate is 20%.
- The amount of tax-free income can be up to €500 per month and up to €6,000 per year.
- The corporate income tax (CIT) applicable to dividends is 20/80. The CIT rate applicable to dividends paid on a regular basis is 14/86 and the rate of income tax on dividends paid to a natural person is 7%.
- CIT on retained and reinvested profits is 0%.
- Value added tax varies between 20%, 9% and 0%, and the rates depend on the type of products or services sold by your company.
- The social tax rate is 33% whereas the minimum amount of €584 must be paid/received for the social tax to apply. The minimum amount is the same as in 2021.
- The unemployment insurance contribution rate for employees is 1.6% while the rate for employers is 0.8%. The rates in 2022 are the same as in 2021 and will remain so until the end of 2025.
- The pension fund payment rate is 2% and the rate may change 3 times in a year: on the 1st of January, 1st of May and 1st of September. This is regardless of whether the person has left the Pillar II.
Incorporate’s tax advice
Having a local partner like Incorporate that has over a decade of experience with corporate services, taxes and local legislation is essential to having your company working smoothly. As our experience is extensive, we can help you in several matters related to tax compliance in Estonia, double taxation avoidance agreements between Estonia and other countries, accounting, filing tax returns and declarations, etc.
If you would like to get help with your Estonian business’ taxes or anything else related to your company, please feel free to reach out to us and we will be happy to discuss your needs!
Incorporate also offers affordable monthly subscription packages that are one of the easiest ways for a global entrepreneur to establish a business in Estonia.