Estonia · Tax regime
Estonian Distributed Profits Tax Regime
0% on retained and reinvested profits; 22/78 on distribution since 1 January 2025 (up from 20/80). The 14/86 reduced rate on regular distributions was abolished on 1 January 2025 to align with the 15% global minimum effective rate. The 2% security tax was repealed on 19 June 2025 before ever taking effect, and the separate rise of personal and corporate income tax to 24% was cancelled by the Riigikogu in December 2025 — but VAT did rise to 24% on 1 July 2025 and that is permanent.
Deferring corporate tax indefinitely until distribution is a genuinely powerful compounding tool, and it is the real reason to look at Estonia. But 2025-2026 has been legislatively chaotic — a security tax legislated then repealed before taking effect, a rate rise to 24% legislated then cancelled — and most published commentary has not caught up. Do not take any Estonian tax memo at face value without checking its date.
Qualifying routes
0% — no tax liability arises until profit is distributed
22/78 — 22% of the gross amount, equivalent to 28.2% of the net distribution
The facts
- Total landed cost
- Nothing until you distribute. On distribution, 22% of gross (28.2% of net). Personal income tax is a flat 22%.
- Physical presence
- Applies to Estonian-resident companies; personal presence is a separate question governed by the 183-day rule
- Family
- n/a — a corporate regime
- Permanent residency
- n/a
- Citizenship
- n/a
- Language test
- n/a
- Dual citizenship
- Not permitted — you would have to renounce
- Requirements
- an Estonian-resident company (typically an OÜ)profits retained rather than distributed, to defer the charge
- Widely circulated sources are WRONG on the 2026 rates. EY's global alert still states personal and corporate income tax rise to 24% in 2026 — that alert predates the December 2025 cancellation. The Estonian Tax and Customs Board confirms 22% for both 2025 and 2026, and 24% only for VAT. EMTA governs.
- VAT did rise to 24% on 1 July 2025 and it is permanent. This is the rate rise that actually happened and it is missing from most briefings.
- The 14/86 reduced rate on regular distributions was abolished on 1 January 2025. Structures built around it need revisiting.
- 0% on retained earnings does not help you if your home country has CFC rules — most do. An Estonian OÜ owned by a resident of a CFC jurisdiction may be taxed there on accrual regardless of whether Estonia taxes it.
- Effective management matters: run the company from your living room in another country and that country may tax it as its own resident.
- The 'tax hump' on personal basic exemption was abolished for 2026 — a flat EUR 700/month (EUR 8,400/year) now applies to all resident workers, replacing the tapering allowance. This materially improves the personal position and is missing from most summaries.