Estonia has a very attractive tax system. There are no analogues of such a system in the European Union. Only in Estonia, company profits are taxed only when they are distributed as dividends
. If the profit is reinvested in the further activities of the company, then there is no taxation, i.e. the income tax is actually 0%.
It should be noted that income tax is levied on company profits distributed in the form of dividends paid to both residents and non-residents of Estonia. All legal entities registered in Estonia, regardless of their form of ownership, qualify as Estonian companies. Accordingly, they must tax their income under these rules. Income tax when distributing profits:
• 20% (formula 20/80 applies)
- this is the general tax rate on dividends.
• 14% (formula 14/86 applies)
- income tax rate for regular payments (annual distribution of profits). You can apply this principle from 2019.
Thus, in Estonia there is a 0% tax on profits that are re-invested and not distributed as dividends. This is a unique opportunity for entrepreneurs around the world!
If you want to register a company online, then read more in our article Company in Estonia in 24 hours
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on our website.