Income tax

Income tax is divided into two:

• Individual income tax 22%
• Corporate income tax 22/78

Individual Income tax

Individual income is also taxed with income tax, and when making payments, the payer must withhold and pay income tax on employees’ gross wages, additional payments, bonuses, vacation pay, and other payments that are considered wages.

The individual income tax rate is 22%. The taxation period is a calendar month. The tax declaration TSD must be submitted to the Tax and Customs Board by the 10th day of the month following the payments or expenses either in the e-services environment e-MTA or at the Tax and Customs Board service office.

Corporate Income tax

Legal entities (companies, non-profit associations, foundations, public legal entities, and state commercial enterprises) pay income tax on fringe benefits, gifts and donations, entertainment expenses, distributed profit (dividends), and equity withdrawals. From 2025 onwards, all payments are taxed at a uniform rate of 22/78. Fringe benefits are taxed with social tax in addition to income tax.

A distinctive feature of the Estonian income tax system is that a company’s tax liability arises when distributing profit (paying dividends). The dividend tax rate is 22/78. If a company does not distribute profit but invests it in the company, no tax liability arises.