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]

JustAnotherNomad said:
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 (profits are only taxed on withdrawal)
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JustAnotherNomad said:
- 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?) (board member fee is not obligatory)
- 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)
Click to expand...

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this minimum tax is outdated and not applicable anymore, as Estonia has removed this provision for low tax territories from its legislation which was replaced now simply by EU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

JustAnotherNomad said:
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.
Click to expand...

In practice this hasnt been enforced.
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[JustAnotherNomad]

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

 

[Don]

JustAnotherNomad said:
Thanks, very interesting. Why 0.1%? That seems like a very strange number.
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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 subsection 1 if income tax has been paid on the share of profit on the basis of which the dividends are paid, if income tax on the dividends has been withheld in a foreign state or if the dividends have been received on the financial assets acquired for the money in the pension investment account.

 

[Jerry1911]

Don said:
I just wanted to highlight the fact that overall tax burden can be reduced to a very low rate (e.g., 0.1%)
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Would a SVG LLC and its optional 1% corporate tax fit the bill?

 

[Don]

Jerry1911 said:
Would a SVG LLC and its optional 1% corporate tax fit the bill?
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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.

Last edited: Jan 15, 2024

 

[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]

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

inector said:
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.
Click to expand...

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.