Tax code of Estonia

[JustAnotherNomad]

@Don and @fshore already mentioned some things about Estonia's tax code over here:
https://www.offshorecorptalk.com/th...-substance-offshore-company.41517/post-261656
But Estonia was off-topic there, so I thought, why not continue this discussion in a separate thread.

Corporate tax:
- No corporate tax, as long as dividends aren't paid out
- No tax exemption on capital gains, they are treated like any other kind of profit
- Salaries of Estonian tax nonresidents are not taxed in Estonia, unless the work was carried out in Estonia (could be a good option for digital nomads)

Personal tax:
- Director's fee always subject to Estonian personal income tax, no matter where you live (do you have to pay a director's fee or could it all be salary?)
- You can have an apartment in Estonia (and be registered as a resident), but won't necessarily be considered tax resident in Estonia if it's not your center of vital interest (could be a good option for digital nomads who need an address for banking/compliance)
- For Estonian tax residents, they can receive dividends free of tax, provided that the dividends have been "subject to tax" (minimum 7% or something like that)

Regarding the taxation of salaries paid by Estonian companies to tax nonresidents, my last status as of a couple years ago was that this is a grey area if you don't have a proper tax residency anywhere (perpetual traveler).
So, yes, they definitely aren't taxed in Estonia if you have a proper tax residency, but if your tax residency status is unclear (perpetual traveler), Estonia might tax you. Not sure if that has ever happened to anyone though.

Other benefits:
- Large tax treaty network
- Good reputation

Any other things people would like to share?

 

[Juleski70]

Also worth noting that - if I understand correctly - dividends from subsidiaries can pass‌ through to the shareholder(s) tax free, making it an interesting option as a holdco or‍ parent company

 

[Don]

this minimum tax is outdated and not applicable︆ anymore, as Estonia has removed this provision for low tax territories from its legislation which︇ was replaced now simply by EU non-cooperative jurisdictions opening up new possibilities). Now its possible︈ to get dividends taxed at 0.1%

 

[JustAnotherNomad]

Thanks, very interesting. Why 0.1%? That seems like a very strange number.

 

[Don]

Some level of tax needs to be paid in order for the dividends‌ to qualify as non-taxable. 0.1% is not written anywhere but I just wanted to highlight‍ the fact that overall tax burden can be reduced to a very low rate (e.g.,⁠ 0.1%)

Ill copy here the up to date provision from income tax act:

§ 18.⁤ Dividends and income from holding
(1) Income tax is charged on all dividends and other⁣ profit distributions received by a resident natural person from a foreign legal person in monetary⁢ or non-monetary form.

(11) Income tax is not charged on the dividends specified in subsection︀ 1 if income tax has been paid on the share of profit on the basis︁ of which the dividends are paid, if income tax on the dividends has been withheld︂ in a foreign state or if the dividends have been received on the financial assets︃ acquired for the money in the pension investment account.

 

[Jerry1911]

Would a SVG LLC‍ and its optional 1% corporate tax fit the bill?

 

[Don]

This works if the 1% is considered a WHT.

Based on Estonian‍ law, dividends are exempt from tax when they have already been taxed.

There are other⁠ cases when dividends are exempt from tax, for example, when paid out by a tax-resident⁤ company. In some cases, a tax-resident company can redistribute profits that are not taxed.

 

[pavel1037w]

Hey everyone , is it possible to have an estonian E-Resideny as a digital nomad,‌ and to sell print on demand products in the United States that are also made‍ in the US?

 

[inector]

Does it work only if the dividends pass through the‍ Estonian company?

...or can for example Maltese company send dividends straight to the Estonian resident⁠ shareholder at 5%? No personal tax.

 

[Don]

Dividends from foreign entities are tax-free for natural resident‍ shareholders in Estonia if tax was already withheld from dividends abroad or if dividends are⁠ received from a local Estonian company. With Malta, it would be more efficient if you⁤ had an Estonian holding, so there would be a 5% corporate tax in Malta, and⁣ dividends would be distributed tax-free to Estonian tax residents from the holding.