Estonian tax system
The Estonian tax system is one of the most liberal in the world. Estonia does not impose gift, inheritance or estate taxes. All taxes in Estonia can be declared and tax returns lodged via the e-Tax Board/e-Customs system, which is the electronic service desk for the Tax and Customs Board and operates 24/7.
The existing national taxes include income tax, social tax, land tax, gambling tax, value-added tax, duty and excise taxes and heavy goods vehicle tax. Some transactions may be subject to payment of state fees or stamp duties. In addition local governments have the authority to impose local taxes, however that is rarely done in practice.
Estonian resident companies and permanent establishments of foreign entities are subject to income tax only in respect of all distributed profits. Fringe benefits are taxable only at the employer level and only income and social tax are paid on these. Members of the management board are treated as employees for fringe benefit purposes. The income tax rate for all distributions is 20%.
Residents pay tax on their worldwide income, however taxable income does not include dividends paid by Estonian or foreign companies where the underlying profits have already been taxed. Non-residents pay tax only on their income received from Estonian sources. The same 20% rate income tax rate applies. An individual is treated as resident in Estonia if they have a permanent place of residence in Estonia, are present in the country for 183 days or more during any 12-month period, or if are employed in the public state service of Estonia, dispatched abroad.
VAT is charged on the 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 and registered as a taxable person. The threshold for mandatory registration as such is €16,000. The standard VAT rate is 20% and the reduced rate is 9% or 0%; 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.
Agreements avoiding double taxation have been concluded with over 30 countries including the EU, which increases simplicity and certainty of the Estonian tax system.
You can also find the tax rates from the Estonian Tax and Customs Board website: http://www.emta.ee/eng/business-client/income-expenses-supply-profits/tax-rates
What are the taxes in Estonia, Sweden, Finland and in the United Kingdom in 2017?
|VAT||20%, threshold 16,000 EUR||24%, threshold|
|25%, no threshold||20%, threshold|
|VAT reduced rate||9%, books, press, accommodation, medicine||14%, grocery 10% public transportation, cultural events||12%, grocery, catering and accommodation 6%, public transportatio, books, cultural events, tickets||5%, electricity, gas and heating oil for non-business use, energy-saving materials for residential purpose, certain personal hygiene items, certain building work with respect to residential dwellings|
|VAT zero rate and exempt from VAT||postal, insurance, healthcare and social services, aviation||postal, insurance and social services||healthcare, dental care, social services, education, banking, insurance, aviation||public transport, most food items, printed newspapers/books/magazines, children’s clothing, certain building work with respect to residential dwellings, insurance, financial services, direct-mail postage services|
|Corporate income tax||20% (taxation deferred until distribution of profit)||20%||22%||20%|
|Dividend income tax||gross rate 20%||progressive 7.5%, 27%||30%||N/A|
|Fringe benefits taxation|
20% (business related representation costs);
20% income tax and 33% social tax (employee gifts and benefits)
|N/A||N/A||most employee benefits are treated as employment income, subject to personal income tax and Employers’ National Insurance|
|Obligatory pension contribution||N/A||18.9% (age under 53 years)||Included in the social security contributions||N/A|
|17.4% (age above 53 years)|
|Workplace pension contributions||N/A||N/A||N/A||Total minimum contribution of 2% with at least 1% employer contribution|
|Social security contributions||33%, unemployment tax 0.8%||2.08%,|
unemployment tax 1%;
collective life insurance 0.07%; accident insurance 0.9%
progressive Employers’ National Insurance: 0%, 13.8%
regressive Employee National Insurance: 0%, 12%, 2%
|Personal income tax||20%||progressive||progressive|
Dividends: 0%, 7.5%, 32.5%, 38.1%
Other income: 0%, 20%, 40%, 45%
|Capital gains tax||20%||progressive||30%|
Sale of residential property: 0%, 18%, 28%
Other capital gains: 0%, 10%, 20%
|Obligatory pension contribution (employee)||2%||5.7% (age under 53 years)||N/A||N/A|
|7.2% (age above 53 years)|
|Workplace pension contributions||N/A||N/A||N/A||Total minimum contribution of 2% with at least 1% employer contribution.|
|Unemployment tax (employee)||1.60%||1.15%||N/A||N/A|