Estonian resident companies and permanent establishments of the foreign entities (including branches) are subject to income tax only in respect of all distributed profits (both actual and deemed), including:
If there are no dividends for the shareholders, the taxation for the company is ZERO.
Fringe benefits are taxable at the level of employer. The employer pays income tax and social tax on fringe benefits.
All distributions are subject to income tax at the rate of 20% of the amount of taxable payment. The transfer of assets of the permanent establishment to its head office or to other companies is also treated like a distribution. As of 1 January 2009, dividends paid to non-residents are no longer subject to withholding tax at the general rate of 20%, irrespective of participation in the share capital of the distributing Estonian company. However, various withholding taxes may still apply to other payments to non-residents if they do not have a permanent establishment in Estonia or unless the tax treaties otherwise provide.
As the tax period of corporate entities is a month, the income tax shall be returned and paid monthly by the 10th day of the following month.
Employers registered in Estonia (including permanent establishments of the foreign entities) must pay social tax on all payments made to employees, except on those specifically exempted by law. In case of an individual engaged in business and registered as such with the Tax Authorities, social tax liability lies with the individual. Fringe benefits and the income tax thereof are also included in the taxable base. Currently only employers and individuals engaged in business are liable to make social tax contributions. Employees are not required to pay social tax.
The rate of social tax is 33% (20% for social security and 13% for health insurance).
Residents pay tax on their worldwide income. Taxable income includes, in particular, income from employment (salaries, wages, bonuses and other remuneration); business income; interest, royalties, rental income; capital gains; pensions and scholarships (except scholarships financed from state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.
Non-residents pay tax only on their income received from Estonian sources. Income taxable in Estonia includes:
VAT is charged on supplies of goods and services in the course of business activities and self-supply of goods and services.
A taxable person is an individual engaged in business who is registered as taxable person. A taxable person shall add of the amount of VAT to the taxable value of the goods transferred or services provided, calculate the amount of VAT due to pay, pay VAT, preserve documents, maintain records and issue invoices in accordance with requirements.
The threshold for obligatory registration as a taxable person is EUR 16,000. The threshold for taxable person with limited liability in case of acquisition of goods is EUR 10,000. There is no threshold in case of acquisition of services.
The taxable period is one calendar month and VAT returns shall be submitted to the tax authority by the 20th day of the month following the taxable period.
The standard rate of VAT is 20%; the reduced rate is 9% and 0% in some cases.
Land tax is levied on the taxable value of all land (other than that which is specifically exempt) based on an official valuation. The owners of the land are liable to land tax. The annual land tax rate varies between 0.1% and 2.5% of the assessed value of the land. The council of the local authority is authorised to establish the rate of land tax.
Excise duties are levied on tobacco, alcoholic beverages, fuel, electricity and packages.
Heavy goods vehicle tax is paid for the following classes of vehicles which are intended for the carriage of goods: lorries with a maximum authorised weight or gross laden weight of not less than 12 tons; road trains composed of trucks and trailers with a maximum authorised weight or gross laden weight of not less than 12 tons.
Gambling tax is imposed on amounts received from operating games of skill, totalizator, betting and lotteries. Tax is charged also on gambling tables and machines used for games of chance located on licensed premises.