TKEG Expat ™ (South Africa) Estonia Corporate Tax Guide

Standard Corporate Income Tax Rate:
In Estonia, resident enterprises are taxed on profits derived from global income distributions, while non-resident fixed institutions are taxed only on profits derived from Estonia income distributions.
The company's undistributed profits are exempt from tax. Such exemptions include both active (e.g., trading) and passive (e.g., dividends, interest, royalties). It also includes capital gains from the sale of various assets including stocks, securities, and real estate. Distributed profits are generally subject to corporate income tax at 22% of the net profit distribution (22/78 on the net amount).
Starting in 2018, companies that distribute profits on a regular basis are taxed at a reduced rate of 14% if the amount of dividends is less than or equal to the taxable dividends paid in the previous three years.

Overview of VAT in Estonia:
The following transactions are subject to Estonia VAT:

1. provision of taxable goods and services in Estonia;
2. import of dutiable goods;
3. intra-Community acquisitions of goods;

The standard VAT rate is 24%. A reduced rate of 13% applies to hotel accommodation services. A reduced rate of 9% applies to books, periodicals (both physical and electronic, with few exceptions), and listed pharmaceuticals. VAT on exported goods and certain services is 0% (i.e. exempt).
Certain services, such as health care, education, insurance, certain financial, and securities transactions, are exempt from tax. Real estate transactions are generally exempt from VAT, but taxpayers can elect to add VAT if certain conditions are met.

Payroll Tax:
In addition to paying social tax, unemployment insurance, and mandatory cumulative retirement benefits, employers are required to deduct personal income tax, mandatory cumulative retirement schemes, and personal income tax at a rate of 22%.

Social security insurance:
Employers operating in Estonia must contribute to social security insurance at a rate of 33% (20% for pension insurance and 13% for health insurance). There is no upper limit on the amount you can contribute.
In addition to social taxes, unemployment insurance premiums are also paid. The employer must pay 1.4% on the basis of the employee's salary, and the employee must pay 1.6% (to be paid in advance by the employer).

Mandatory Accumulation Pension Scheme
If an employee joins a pension scheme, the employer must contribute 2% to the mandatory Accrued Pension Scheme. Under the Mandatory Cumulative Pension Scheme, resident employees born after December 31, 1982 must participate in the scheme. Resident employees born before this date can voluntarily join the program, but cannot withdraw from the program after joining.

Overview of import and export taxes:
Many imported goods from outside the EU are subject to customs duties and excise duties. The tariffs and rates applied to different goods vary widely and change frequently.
Excise duty is levied on certain consumer goods such as cigarettes, cigars, mineral oil, alcohol products. If it is used only as a raw material, no consumption tax is levied. If the goods are exported, the excise duty can be refunded.

Employers should withhold personal income tax (PIT) at the flat rate of 22% after deduction of the employee's contribution to unemployment insurance scheme, compulsory accumulative pension scheme, and, if relevant, personal deduction, which may be up to EUR 700 per month.