Estonian Tax Overview 2016

Dates to declare and to pay taxes

  • VAT 20th of next month
  • Social and income tax 10th of the month following the month of payment
  • Annual report 6 months after end of fiscal year

Audit is required

Is obligatory for PLC-s (Aktsiaselts) and for LLC (OÜ – Osaühing)

If at least two requirements are fulfilled

  1. Turnover exceeds 4 000 000 EUR
  2. Balance sheet total exceeds 2 000 000 EUR
  3. Number of employees is 60 or more

 

Or one requirements is fulfilled

  1. Turnover exceeds 12 000 000 EUR
  2. Balance sheet total exceeds 6 000 000 EUR
  3. Number of employees is 180 or more

External control of annual report

If at least two requirements are fulfilled

  1. Turnover exceeds 1 600 000 EUR
  2. Balance sheet total exceeds 800 000 EUR
  3. Number of employees is 24 or more

 

Or one requirements is fulfilled

  1. Turnover exceeds 4 800 000 EUR
  2. Balance sheet total exceeds 2 400 000 EUR
  3. Number of employees is 72 or more

Principal taxes (Corporate)

  • Value added tax 20%
  • Social tax 33%
  • Unemployment tax 0.8%
  • Corporate Income Tax payable on profit distribution 20% on gross (will be withheld in case profit is distributed), which makes 20/80 on net

Tax Exempt Minimum

Monthly average 170 EUR. Total annual 2040.- EUR.

Initial data

  • Social tax 33%
  • Individual income tax 20%
  • Unemployment insurance tax 1.6%
  • Tax-exempt income per month 170 EUR
  • Contribution to compulsory pension fund 2% or 3%

Corporate Income Tax

In Estonia, corporate income tax is not paid when the profit is earned, but rather when it is distributed in the form of a dividend or otherwise. Thus indefinite tax deferral is possible as long as profit is retained or reinvested.

Example of tax calculation:

 The aggregate sum of dividend payable to the shareholders from the profit of the financial year of 2015 (or later) is 100 000.- EUR

Allocated dividend amount 100 000 EUR

Income tax 100 000 x 20/80 = 25 000 EUR

The shareholder receives 100 000 EUR

The company’s cost is 125 000 EUR

Capital Gains Tax

There is no separate capital gains tax in Estonia. Gains derived by resident companies or branches of foreign companies are exempt until a distribution is made.

Branch Profit Tax

There is no specific branch profit tax in Estonia. Branches of foreign companies are taxed under the same principles as resident companies, i.e. taxed on the distribution of profits.

Fringe Benefits Taxes

Fringe benefits are taxed as salary income. 20% income tax is levied on the gross value of the benefit plus 33% social security contribution.

Local Taxes

Local government has the right to impose local taxes but presently only a few municipalities do so.

Foreign Tax Relief

Under Estonia’s double tax treaties, foreign tax is mostly either relieved by exemption or credited.

Related Party Transactions

Related party transactions may be adjusted for tax purposes if the transactions are not at arm’s length. Transfer pricing rules follow the OECD principles.