- An Estonian company pays no income tax on profit it keeps.
- When profit is paid out, the company pays 22% of the gross amount, which is 22/78 of the net dividend.
- Estonia usually withholds no further tax on dividends paid abroad.
- The owner’s home country decides how the dividend is taxed there, and it may also tax the company if the company is run from there.
- No change to the rate has been passed for 2027.
How corporate tax in Estonia works
In most countries a company pays corporate tax every year on its accounting profit. Estonia taxes the company only when it distributes profit. Profit that stays in the company carries no corporate income tax, whether it is kept in the bank or reinvested.
When the company pays a dividend, it pays income tax at 22% of the gross amount. Because the dividend paid to the owner is the net amount, the tax is calculated as 22/78 of what is paid out. The company declares the tax in its monthly tax return (TSD) and pays it by the 10th day of the following month.
A dividend can only be paid out of profit shown in the approved annual report, after covering losses from earlier years. It cannot be paid if the company’s net assets would fall below its share capital and the reserves it must keep.
Example: €100,000 of profit
| What the company does | Estonian corporate tax | Paid to the owner | Left in the company |
|---|---|---|---|
| Keeps all profit | €0 | €0 | €100,000 |
| Pays a net dividend of €50,000 | €14,102.56 | €50,000 | €35,897.44 |
| Pays out all profit | €22,000 | €78,000 | €0 |
The calculation is the same at any size: €50,000 × 22/78 = €14,102.56. The tax is exactly 22% of the €64,102.56 that leaves the company.
What triggers the tax
Estonian law taxes profit distributed in any form. These payments are taxed at 22/78 in the month they are made:
| Payment | Tax |
|---|---|
| Dividends and other profit distributions | 22/78 when paid |
| Return of share capital or a buy-back of shares | Tax-free up to the money and assets the owners put in; above that, 22/78 |
| Payouts on liquidation | Same rule: taxed above the owners’ contributions |
| Fringe benefits to employees and board members, such as a car for private use, housing or a loan below market interest | 22/78, plus 33% social tax |
| Gifts and donations | 22/78. Small promotional items and some donations to non-profits are exempt |
| Costs not related to the business, payments without a valid supporting document, fines | 22/78 |
| Deals with related parties at prices that differ from market value | Tax on the difference |
| Loans to shareholders that are in substance a distribution | 22/78 |
Related parties include a shareholder with 10% or more, companies in the same group and the board members.
Loans from the company to its owner
An Estonian company can lend money to its shareholder. The loan is taxed as a profit distribution if its terms show that it is a dividend in practice, for example when there is no repayment schedule, no interest, the loan keeps being extended, or the borrower clearly cannot repay.
If the borrower is a board member, interest below the market rate is a fringe benefit. If a loan was taxed as a distribution and is later repaid, a later dividend paid out of the repaid amount is tax-free, so the same money is not taxed twice.
A written loan agreement with market interest and a real repayment schedule is the safest way to do this.
Dividends: what the owner pays
In Estonia
An individual resident in Estonia pays no further tax on a dividend from an Estonian company, and the company withholds nothing. Estonia also withholds no tax on dividends paid to individuals or companies abroad. The company’s 22/78 is its own corporate tax, paid once. One exception remains: if a dividend paid to an individual comes from profit taxed at the old 14% rate before 2025, 7% is withheld.
Holding companies
An Estonian company that owns at least 10% of a company in the European Economic Area or Switzerland can pass on the dividends it receives without paying the 22/78 again, provided the subsidiary is subject to tax. Our article on the Estonian holding company explains the setup.
In the owner’s country
The owner’s country of residence decides how the dividend is taxed there. Most countries tax dividends from foreign companies as personal income. Whether that country gives any credit for the company’s 22/78 depends on its own rules and its tax treaty with Estonia, so the owner should confirm this with a tax advisor there before the first dividend. For owners living in Spain, our guide in Spanish covers this in detail.
Paying the owner: salary, board member fee or dividend
An owner who also runs the company can be paid in three ways, and each is taxed differently. The table shows what one person receives in one month when the company spends €10,000, using 2026 rates and before any tax in the owner’s country.
| Dividend | Board member fee, board member living abroad | Salary, employee resident in Estonia | |
|---|---|---|---|
| Paid by the company on top | €2,200 income tax | €2,481.20 social tax (33%) | €2,466.37 social tax (33%), €59.79 unemployment insurance (0.8%) |
| Gross amount | €7,800 | €7,518.80 | €7,473.84 |
| Deducted from the person | Nothing | €1,654.14 income tax (22%) | €119.58 unemployment insurance (1.6%), €149.48 funded pension (2%), €1,431.05 income tax (22% after the €700 monthly allowance) |
| Received | €7,800 | €5,864.66 | €5,773.73 |
A dividend leaves the most money in Estonia, but it builds no Estonian pension or health insurance cover, and it can only be paid from profit in an approved annual report. Social tax on a salary or a board member fee pays for that cover.
- A board member fee paid by an Estonian company is taxed in Estonia even if all the work is done abroad. The company withholds 22%. A tax treaty can lower this if the board member provides a certificate of residence.
- Board member fees carry 33% social tax but no unemployment insurance.
- The tax-free allowance is a flat €700 a month (€8,400 a year) since 1 January 2026. For a salary paid to an employee, social tax is due on at least €886 a month in 2026.
- The funded pension is deducted only for people resident in Estonia.
VAT
The standard VAT rate in Estonia is 24% since 1 July 2025, with no end date. A company must register for VAT once its taxable turnover in Estonia passes €40,000 in a calendar year. Services to businesses in other EU countries are usually taxed in the customer’s country under the reverse charge, so they do not count toward that threshold. A company can register voluntarily earlier, for example to recover VAT on its costs.
Where the company is taxed
A company formed under Estonian law is an Estonian tax resident. The owner’s country of residence can still take the view that the company is managed from there and tax its profit under its own rules, or that the company has a permanent establishment there. If the owner lives in one country and makes the company’s decisions there, that country may tax the company’s profit. A legal address and a contact person in Tallinn do not change where the company is managed.
Many countries also have rules on controlled foreign companies, under which some income of a low-taxed foreign company is added to the owner’s own taxable income. These rules are national and should be checked with an advisor in the owner’s country.
What is changing
As of 30 October 2026:
- Passed: from 2027 the monthly tax return (TSD) must be filed electronically.
- Passed: from 1 January 2027 sales to other EU countries are reported on the VAT return itself, and the separate EU sales report ends.
- Proposed in the 2027 state budget: the minimum monthly base for social tax rises from €886 to €946.
- Not changing: the 22/78 rate, the absence of tax on retained profit, the absence of withholding on dividends and the €8,400 tax-free allowance.
Outdated figures still found online
| Claim | Position in 2026 |
|---|---|
| 20% rate, 20/80 on dividends | 22%, 22/78, since 1 January 2025 |
| 14% on regular dividends | Repealed from 2025 |
| 2% tax on company profit from 2026 | Never applied. The security tax was repealed in July 2025 |
| 24% income tax, 24/76 on dividends from 2026 | Cancelled in December 2025, before it applied |
| VAT returns to 22% in 2029 | That date fell away with the security tax. 24% has no end date |
| Tax-free income shrinks as income rises | Replaced by a flat €700 a month (€8,400 a year) from 1 January 2026 |
How Capture works with company tax
Capture is a licensed Estonian corporate services provider (FIU000432). We keep the accounts of Estonian companies owned from abroad and give written advice on Estonian company tax.
- Core, €79 a month, for companies that are not VAT-registered. Employee or board member payments are an add-on.
- Managed, €199 a month, for VAT-registered companies, with the VAT and payroll returns (KMD, TSD) and one employee or board member payment.
- Extended, €299 a month, with three employee or board member payments and a quarterly review.
- Tax advice on dividends, shareholder loans and salary versus dividend, €90 an hour.
Every plan includes the legal address, the contact person and the annual report. Prices are without VAT. We add 24% VAT where it applies. This page is general information. For advice on a specific situation, write to us below. We reply within 2 business days.
Frequently asked questions
Is corporate tax in Estonia really 0%?
Only while profit stays in the company. When profit is paid out as a dividend or in another form, the company pays 22/78 of the net amount, which is 22% of the gross.
What is the corporate tax rate in Estonia in 2026?
22% on distributed profit, calculated as 22/78 of the net amount. No change to this rate has been passed for 2027.
How is dividend tax calculated?
The net dividend is multiplied by 22/78. A net dividend of €7,800 costs the company €2,200 in tax, €10,000 in total.
Is there withholding tax on dividends paid to non-residents?
No. Estonia withholds nothing on dividends paid to individuals or companies abroad.
Do owners abroad pay tax at home on dividends from an Estonian company?
Usually yes. The owner’s country of residence taxes the dividend under its own rules. Whether it gives credit for the company’s 22/78 depends on its law and its tax treaty with Estonia.
Can an Estonian company lend money to its owner?
Yes, with a written agreement, market interest and a repayment schedule. A loan that works like a dividend is taxed as one.
When is the tax paid?
By the 10th day of the month after the payment, together with the monthly tax return (TSD).
Can a dividend be paid in the first year?
A dividend needs profit shown in an approved annual report. In practice the first dividend is paid after the first financial year closes and the annual report is approved.