your taxes vs your company taxes as an estonian e-⁠resident

Andy Stofferis • Feb 21, 2025 • 12 min read

A general summary of taxes in Estonia for you and your business, with links to useful resources

Three e-residents, a woman and two men, coworking and discussing your taxes vs company taxes

Companies are distinct legal entities, which means that - as a business owner - it has a distinct legal form from you as a natural person. This also means that you and your company have distinct legal forms for taxation purposes. Business owners must therefore be really clear on their tax obligations and liabilities - both as an individual and as the owner of their company.

In most countries, businesses and individuals are subject to different types of taxes, which are often calculated differently. Furthermore, doing business across borders adds another layer of complexity as it might raise multiple tax residencies and foreign tax liabilities. That is, if you run your business in different countries, you may be liable for company (and possibly personal) tax in those countries. A variety of laws, international conventions, treaties, and practical factors will dictate where taxes should be paid, meaning every case should be considered according to its own circumstances. It's thus important to get professional tax advice for your own personal situation if you are running an international business.

If you’re contemplating where to establish your company for tax purposes, or if you already have an established company in Estonia through the e-⁠Residency program, then you may want to find out more about paying company taxes in Estonia.

This article therefore aims to simplify personal and company tax in Estonia for e-⁠residents, providing an overview of relevant taxes and the applicable laws.

Just as personal vs company tax is different, e-⁠Residency is not the same as tax residency for you or your company. E-⁠Residency will not change your personal tax residency. Plus, e-⁠Residency will not exempt your Estonian company from a dual tax residency, permanent establishment, or CFC rules in another country.

As I’m not a tax expert, this article is a general summary of taxes in Estonia and aims to provide links to further resources. For example, the Estonian Tax and Customs Board (EMTA), which governs taxation in Estonia, has a dedicated resource on e-⁠Residency tax information.

Paying Personal Tax as an Estonian e-resident
- Personal tax residency
A Quick Guide to Company Tax in Estonia
- Business-related taxes in Estonia: An overview
Changes to corporate income tax in Estonia from 2025
Corporate Tax Residency and Simplifying Corporate Tax in Estonia
Final thoughts on taxes for Estonian e-residents

Paying Personal Tax as an Estonian e-⁠resident

Determining where you owe personal tax can be a complex issue. It may depend on your citizenship, where you reside most of the year and are tax resident, or other factors.

Every country’s tax laws are different and vary in their legal, financial and administrative implications. It’s important that you consider where you owe personal tax, and that you seek professional tax advice to properly understand your obligations and risks.

As mentioned above, e-⁠Residency is not the same as tax residency, which means that even if your company is established in Estonia, you will likely owe personal income tax elsewhere.

Personal tax residency

As a general rule, people have to pay personal taxes in the country where they are tax residents. This may or may not be the same place where they actually reside or live for most of the year. It’s advisable to seek professional tax advice on where you owe personal taxes.

Depending on your tax jurisdiction, you may be liable to pay personal income tax (including capital gains tax, interest, royalties), social security tax, and sales tax.

The vast majority of e-⁠residents live outside of Estonia and are therefore not considered tax residents there. In the majority of cases, e-⁠residents will therefore not owe any personal taxes in Estonia.

Read more about individual tax residency in the e-Residency Knowledge Base:

Individual tax residency

Generally, individuals are taxed based on two principles – based on their residency and based on the source of income.

One possible exception is if an Estonian e-⁠resident pays themselves a board member’s fee from their Estonian company. E-⁠residents should check the double taxation agreement between Estonia and their country of tax residence to make sure they are not double taxed on this income. Estonia has double taxation agreements with over 60 countries, so there’s a high likelihood that you won’t get taxed twice for the same income, but it's critical to get professional tax advice.

Personal tax for digital nomads may be complicated, as nomads often travel and work in multiple countries each year. It’s particularly important for nomads to consider the implications of their travel destinations on personal tax before embarking on any journey. It’s also advisable that digital nomads plan their travels strategically so that they can register a tax residency that is most attractive and suitable to their circumstances and needs. While it might be tempting for digital nomads not to have a tax residency anywhere, in the long run this might harm their chances of getting loans or financing as they will not have any fiscal history to show.

Read more about taxation for digital nomads in our blog post:

A Complete Digital Nomad Tax Guide

As a digital nomad, taxes can get confusing. We’re here to help you navigate them like a pro with this digital nomad tax guide.

A Quick Guide to Company Tax in Estonia

Estonia is well known for its competitive tax rates. In fact, it’s been number one on the Tax Competitiveness Index for 11 years in a row. This, combined with the ease of registering a company and managing a company remotely, makes Estonia a desirable location for many startups and entrepreneurs.

When you register your company in Estonia, it will be automatically registered by the Estonian Tax and Customs Board as a tax resident in Estonia. However, the rules of other countries, regional tax regulations, and double taxation agreements might mean your company has foreign tax liabilities. These rules and laws can be complicated, and will depend on the specific facts and circumstances of each company's situation. It’s thus important to seek professional advice from someone who is a tax expert in the country where your company is registered and where you and your employees actually manage and carry out the work of your company.

There are numerous articles and resources on the Estonian e-⁠Residency website that can assist with finding out more about paying company tax. This includes articles about:

Start here to understand cross-border taxes:

Estonian corporate taxes & cross-border taxation | e-Residency

Understand international taxation for your Estonian company, navigate the tax landscape & simplify your cross-border tax obligations.

Corporates in Estonia only pay tax on distributed profits as dividends and equivalent payments or arrangements. If your company does not make any distributions, then it can reinvest profits and no corporate tax is payable until profit is distributed (but see explanation of 2026-2028 security tax below). This can be particularly helpful for startups wanting to grow and scale.
The corporate income tax on distributed profits is now 22% (taxable base divided by a coefficient of 0.78; effective tax rate 28,21%) (effective from 1 January 2025), which is quite low compared with countries like Argentina, Australia, Germany, Japan, and Mexico.
Companies and natural persons who are engaged in business in Estonia need to register for VAT if their annual turnover earned on Estonian transactions exceeds €40,000. If turnover is earned on transactions in another EU country, the company should register for VAT there. From 2025, there is an EU-wide €100,000 VAT registration threshold for turnover earned in Europe. The standard VAT rate in Estonia is 22%; however the rate is expected to increase to 24% from 1 July 2025.
Any company or natural person that employs staff in Estonia is liable to pay social tax and security and unemployment insurance contributions. The social tax is 33% of the employee’s gross salary; unemployment contributions are 0.8% for employers.

Changes to corporate income tax in Estonia from 2025

Various changes to corporate income tax have taken effect in 2025 in Estonia, as outlined below.

Changes to income tax rate

The corporate income tax rate increased from 20% to 22% (taxable base divided by a coefficient of 0,78; effective tax rate 28,21%) on 1 January 2025.

Changes to dividend tax

As of 2025, the previous reduced 14% rate for regular dividend payments has been eliminated and the 7% withholding tax on reduced-rate dividends has been removed. That means that companies will need to pay income tax on a rate of 22/78 when distributing dividends.

Changes to business expenses allowances

From 2025, businesses are able to claim significantly more business expenses. These expenses relate to foreign business trips, compensation for vehicle use, health promotion benefits for employees, business entertainment related expenses, and promotional gifts.

Security profit tax

Editor's Note (16 April 2025): The Estonian Government has made some policy changes to this security tax package, including to remove the 2% corporate profit tax element and to make the VAT rate increase permanent. The legislative process for implementing these changes should start in May.

For three years from 2026, a 2% tax will be imposed on a company's profits in addition to the general deferred income tax system. This tax is one part of a package of taxes to grow Estonian's economic and security resilience in the face of global shocks and wars. The 2% tax will be levied on the accounting profits of Estonian tax-resident companies and the permanent establishments (PE) of non-resident entities. Taxation period is one calendar year, payable quarterly in advance.

The security tax is calculated on one quarter of the company's pre-tax profit earned in the previous year (or in the year before that - depending on whether the company's report for the previous financial year has been submitted). Deductions from pre-tax profit are limited. Losses from previous periods cannot be carried forward or carried back.

For natural persons, additional personal income tax at the rate of 2% will be imposed from 1 January 2026. This could affect e-⁠residents in two ways: (1) if they pay themselves a board member's fee, and (2) if their company has employees in Estonia. Taxation of natural persons is based on the rules of the Income Tax Act, however most deductions from income under the Income Tax Act will not apply to the security tax.

The third element of the security profit tax is the rise in VAT rate from 22% to 24% from 1 July 2025.

Read more about this tax in our earlier blog post on changes to e-Residency:

Important updates to e-Residency in 2025 and beyond

Read about upcoming regulatory changes in Estonia, including to application fees and taxes, which will impact e-residents and their businesses

Corporate Tax Residency and Simplifying Corporate Tax in Estonia

If you’ve registered an Estonian company, an Estonian OÜ, then as mentioned above that company will be automatically registered as a tax resident of Estonia by the Tax and Customs Board.

However, keep in mind that certain countries have tax laws that say that the place where the company is effectively managed is where it is tax resident. As an Estonian e-resident running your company from outside Estonia, make sure you check the tax laws that apply to you – whether related to the country you live in, your nationality, where your employees are, where your company’s assets are registered, where you and your team carry out most of the work for your company, or any other relevant factor. Many countries have multilateral agreements in place to ensure that there’s no double taxation.

Two important concepts in international tax law are permanent establishment and dual tax residency.

The concept of permanent establishment (which is defined differently in different countries, adding to the complexity of this tax term) generally refers to the place where your business conducts itself (if outside of the country where the company is incorporated) and has a significant and ongoing presence and may trigger tax liabilities in those countries. That could be the result of having a factory, workshop, office branch or an agent in a particular country – giving rise to the ‘permanent establishment’. If your business is multinational and has a presence or permanent establishment in several countries, then it may be liable for corporate tax in several jurisdictions.

When a company or an individual owes tax in more than one jurisdiction, the concept of dual tax residency then comes into play. Dual tax residency can result in you having tax liabilities in two separate jurisdictions, which of course is very undesirable. For that reason, many countries have double taxation agreements to resolve this issue and help ensure that hard-earned profits are not taxed twice. Understanding where you’re liable to pay taxes, and whether double taxation treaties exist and apply to your particular circumstances, can therefore help you minimise your tax liabilities and comply with tax laws and rules.

Tax rules and compliance can have far reaching implications so it’s always best to get tax advice from a duly qualified professional. You'll find many experienced tax advisers on the e-⁠Residency Marketplace.

Tax consultants may also be able to advise your business on whether to reinvest profits to reduce the taxable income and help grow your business, as well as figuring out whether double taxation agreements apply and if your company taxes can be minimised and simplified while maintaining compliance.

Final thoughts on taxes for Estonian e-⁠residents

Understanding the differences between personal and company tax is essential to effectively manage your financial responsibilities. Tax laws around the world vary significantly and Estonian e-⁠residents should carefully consider what corporate and personal tax they owe and where they are liable to pay taxes.

It’s really important to keep abreast of changes in tax legislation: there are various new tax laws that will have implications for business owners in Estonia from 2025, which are covered above.

By understanding the intricacies and requirements of Estonian tax laws, e-⁠residents should have a better idea of how to make strategic financial decisions and to support business growth.

Disclaimer

This article was written by guest contributor Andy Stofferis (www.andysto.com). Andy is not a tax expert and the article is not intended to give any legal or tax advice. Tax laws and regulations vary greatly from country to country, and this information is a general guide only. You are advised to contact a professional tax advisor for any legal or tax advice, and not to rely on this article as gospel.

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your taxes vs your company taxes as an estonian e-⁠resident

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