Taxes in Estonia in 2025 have undergone several changes, but the foundations of the entire tax system have remained the same. Why does this small country attract entrepreneurs and investors? The answers include attractive PIT and CIT tax rates and the absence of tax on unremitted profits. We discuss the highlights of the Estonian tax system in 2025.
Table of Contents
- Taxes in Estonia in 2025 – A Digital and Business-Friendly Economy
- Taxes in Estonia in 2025 – PIT: Simplicity and Flexibility
- Taxes in Estonia in 2025 – CIT: Taxation Only on Profit Distribution
- Taxes in Estonia in 2025 – VAT Rates and Obligations in Estonia
- Estonian Taxes on Investments, Dividends, and Capital Gains
- Taxes in Estonia in 2025 – Summary
- FAQ – Questions and Answers About Taxes in Estonia in 2025
Taxes in Estonia in 2025 – A Digital and Business-Friendly Economy
Since regaining independence, Estonia has focused on innovation and transparency. Today, it is a country with fully digital administration, where a company can be formed online and taxes can be filed in just a few minutes.
As a member of the EU and OECD, Estonia guarantees stability and transparency. It offers many facilitations for foreign investors and entrepreneurs. That is why Estonia is a popular choice for startups and global businesses.
Taxes in Estonia in 2025 – PIT: Simplicity and Flexibility
Personal Income Tax in Estonia is based on a single flat rate.
Starting in 2025:
- The PIT rate is 22%.
- There is a tax-free allowance of up to 654 € per month, decreasing for higher incomes.
- Tax residency is acquired after 183 days of stay in Estonia within any 12-month period.
Tax residents are taxed on their worldwide income. Non-residents are taxed only on their Estonian income. This system ensures compliance with international standards while supporting lower-income individuals.
Taxes in Estonia in 2025 – CIT: Taxation Only on Profit Distribution
One of the biggest advantages of the Estonian tax system is no CIT on retained earnings. CIT applies only when profits are distributed.
| Situation | CIT Rate 2025 |
| Retained profit (undistributed) | 0% |
| General CIT rate | 22% |
From 2025, the preferential 14% CIT rate for regular distributions has been abolished. Additionally, new regulations prevent hidden distributions, such as through shareholder loans or donations.
Taxes in Estonia in 2025 – VAT Rates and Obligations in Estonia
Estonian VAT is in line with EU directives.
In 2025, the VAT rates are as follows:
| VAT Type | Rate |
| Standard rate | 22% |
| Reduced rate (e.g., books, medicines) | 9% |
| Zero rate (exports, intra-EU services) | 0% |
Businesses must register for VAT if their turnover exceeds 40 000 € per year. What is important, VAT filings are fully digital.
Estonian Taxes on Investments, Dividends, and Capital Gains
Estonia offers an attractive taxation model for investment income, allowing for:
- Capital gains and interest taxation at a 20% rate,
- Exemptions for reinvestment through investment accounts,
- Preferential dividend taxation rules (no tax on distributions between EU companies).
For businesses and individuals, this provides flexibility in capital management and real opportunities for tax optimization.
Taxes in Estonia in 2025 – Summary
The Estonian tax system combines simplicity, digitalization, and efficiency. In 2025, its key advantages still apply: no tax on retained earnings, a flat PIT rate, transparency, and full compliance with EU law. This makes Estonia an excellent choice for modern businesses and investors.
Are you thinking about starting a company in Estonia? Contact our experts! See how an Estonian company can help you grow with attractive tax benefits. It’s a smart step toward efficient financial management and business internationalization.
FAQ – Questions and Answers About Taxes in Estonia in 2025
Does Estonia charge corporate income tax (CIT) on profits?
Only upon distribution – undistributed profits are tax-exempt.
What is the PIT rate in Estonia in 2025?
The rate is 22%, with a tax-free allowance of up to 654 € per month.
What are the VAT rates in Estonia?
22% (standard), 9% (reduced), 0% (exports, intra-EU services).
When is VAT registration required?
After exceeding an annual turnover of 40 000 €.
Do I need a physical office in Estonia to start a company?
No – thanks to e-Residency, you can run your business remotely.
How is dividend taxation handled?
Dividends are taxed at the CIT rate – 22% (with no withholding tax for EU companies).
Does Estonia have double taxation treaties?
Yes, with many countries, including Poland.
Do individuals pay tax on capital gains?
Yes – at a 20% rate, with possible exemptions.
Are tax deductions available in Estonia?
Yes, but to a limited extent – the system is based on simplicity.
How is Estonia’s tax system different from Poland’s?
Primarily due to the lack of tax on undistributed profits and by having less bureaucracy.