Estonia increased the corporate tax on dividend distribution from 25% to 28%. Tax on profit next?

[rust3964]

The tax on dividends in Estonia has increased from an effective 25% to 28% beginning in 2025. Does anyone know if this has a chance of being repealed? I would especially like to hear from locals. So sad given they held the line at 25% for 24 years. The rate on profits remains zero, but perhaps this is what they will go after next?

Tax rates | Estonian Tax and Customs Board

On this page you will find the rates of income tax, social tax, contribution to mandatory funded pension and unemployment insurance premium applicable from 2023 to 2024 as well as national minimum wage rates since 1996.

www.emta.ee

 

[Xshore]

So strange that people continue to claim that the Estonian tax is 25% when it is 20%.
If you have 100k profit that you want to pay out as dividends, you pay 20k (20%) tax and pay out 80k, this is the same as in any other country. Yes 20k is 25% of 80k, however you don't calculate the tax rate from the net rate you pay out, tax rates are calculated from the gross rate.

 

[Dandyline]

So strange that people continue to claim that the Estonian tax is 25% when it is 20%.
If you have 100k profit that you want to pay out as dividends, you pay 20k (20%) tax and pay out 80k, this is the same as in any other country. Yes 20k is 25% of 80k, however you don't calculate the tax rate from the net rate you pay out, tax rates are calculated from the gross rate.

Yes, its actually crazy if you calculate it from the net, then many countries have over 100% tax.

 

[anotherone]

So strange that people continue to claim that the Estonian tax is 25% when it is 20%.
If you have 100k profit that you want to pay out as dividends, you pay 20k (20%) tax and pay out 80k, this is the same as in any other country. Yes 20k is 25% of 80k, however you don't calculate the tax rate from the net rate you pay out, tax rates are calculated from the gross rate.

According to this page, it says that dividends are taxed at 20/80 rate?
Calculation of basic exemption | Estonian Tax and Customs Board

Dividends received from an Estonian company and taxed by the company:

• at the standard tax rate 20/80 - will be taken into account as annual income in the amount received (money received by a person);

So, 100000*(20/80)=100000*.25=25000€ ?
So, isn't it 25% of the gross dividend amount paid by the company?

Anyways, this system is taylored for EU residents and all fiscal residents of countries that have a Double tax Agreement in place with Estonia because they can get tax allowances on the amount they paid to estonia at the source when they declare their shareholder dividends in their personal income taxes. (Germany, France, Italy....)
in the end, they pay as much income taxes on the shares as if they would get dividends from a local company in their country of residence.

 

[Xshore]

According to this page, it says that dividends are taxed at 20/80 rate?
Calculation of basic exemption | Estonian Tax and Customs Board

Dividends received from an Estonian company and taxed by the company:

• at the standard tax rate 20/80 - will be taken into account as annual income in the amount received (money received by a person);

So, 100000*(20/80)=100000*.25=25000€ ?
So, isn't it 25% of the gross dividend amount paid by the company?

Anyways, this system is taylored for EU residents and all fiscal residents of countries that have a Double tax Agreement in place with Estonia because they can get tax allowances on the amount they paid to estonia at the source when they declare their shareholder dividends in their personal income taxes. (Germany, France, Italy....)
in the end, they pay as much income taxes on the shares as if they would get dividends from a local company in their country of residence.

I still don't understand why you don't get it. If you have 100k to pay out, you pay 20K tax and pay out 80K.
20K is 20% of the profit of 100K, and it's 25% of the dividend of 80K.

 

[pixbix]

Can i setup a company there to earn 1000euro/month just to have after 15 years a pension plan from estonia?

Corporate taxes in Estonia: 0% on reinvested profits | e-Residency

Estonia's tax system is the most competitive in the world. 0% tax on reinvested profits. 14-20% tax on dividends. Declare & pay taxes online.

www.e-resident.gov.ee

Say you’re employing an Estonian tax resident with a gross salary of 1000 €.

Employee’s unemployment insurance contribution: -16 € (1,6%)
Mandatory funded pension contribution: -20 € (2%)
Monthly tax-free income: 500 €
Personal income tax: -92,8 (20%)

Employee’s net salary: 871,2

 

[rust3964]

The effective tax rate on dividends from 2001-2023 was 25%.

If you make a profit 100,000, and withdraw that as dividends, you calculate what you owe as follows:

100,000 * (20/80) = 25000

Example: How to calculate taxes when paying out dividends​

Say an Estonian company pays a dividend of 10,000 € to a shareholder.
2,500 € (10,000 x 20/80) in taxes must be declared and paid by the Estonian company to the Estonian Tax & Customs Board.
If the Estonian company pays regular dividends to the shareholder, taxes will be 1,627.91 € (10,000 x 14/86).
If the shareholder is a natural person (either resident or non-resident) and receives a dividend taxed at the reduced rate, additional personal income tax of 7% (700 €) is withheld.

Directly take from a government website:

Corporate taxes in Estonia: 0% on reinvested profits | e-Residency

Estonia's tax system is the most competitive in the world. 0% tax on reinvested profits. 14-20% tax on dividends. Declare & pay taxes online.

www.e-resident.gov.ee

 

[Marshal]

Can i setup a company there to earn 1000euro/month just to have after 15 years a pension plan from estonia?

That's a good question.