Estonia · Tax regime
Estonian Distributed Profits Tax Regime
Retained and reinvested profits are taxed at 0%. On distribution, the rate is 22/78 since 1 January 2025, up from 20/80. The 14/86 reduced rate on regular distributions was abolished on 1 January 2025 to bring Estonia in line with the 15% global minimum effective rate. A planned 2% security tax was repealed on 19 June 2025 before it ever took effect, and a separate plan to raise personal and corporate income tax to 24% was cancelled by the Riigikogu in December 2025. VAT, however, did rise to 24% on 1 July 2025, and that increase is permanent.
Deferring corporate tax indefinitely until distribution is a genuinely powerful compounding tool. It is the real reason to look at Estonia. But 2025-2026 has been legislatively chaotic. A security tax was legislated, then repealed before it took effect. A rate rise to 24% was legislated, then cancelled. 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, meaning 22% of the gross amount, which is equivalent to 28.2% of the net distribution.
The facts
- Total landed cost
- Nothing until you distribute. On distribution, tax is 22% of the gross amount, which works out to 28.2% of the net distribution. Personal income tax is a flat 22%.
- Route type
- Tax regime, not a visa
- Physical presence
- This applies to Estonian resident companies. Personal presence is a separate question, governed by the 183-day rule.
- Family
- Not applicable. This is a corporate regime
- Permanent residency
- Not applicable
- Citizenship
- Not applicable
- Language test
- Not applicable
- Dual citizenship
- Not permitted. You would have to renounce.
- Requirements
- an Estonian-resident company, typically an OÜprofits kept in the company rather than distributed, so the charge is deferred
- Widely circulated sources get the 2026 rates wrong. EY's global alert still states that personal and corporate income tax rise to 24% in 2026, but that alert predates the December 2025 cancellation. The Estonian Tax and Customs Board confirms 22% for both 2025 and 2026, with 24% applying only to VAT. EMTA is the authority to follow.
- VAT did rise to 24% on 1 July 2025, and the change 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. Any structure built around that rate needs a second look.
- A 0% rate on retained earnings does not help if your home country has CFC rules, and most do. An Estonian OÜ owned by a resident of a CFC jurisdiction can still be taxed there on accrual, whether or not Estonia taxes it.
- Effective management matters. Run the company from your living room in another country, and that country may treat it as its own tax resident.
- The tax hump on the personal basic exemption was abolished for 2026. A flat EUR 700 a month, EUR 8,400 a year, now applies to all resident workers, replacing the old tapering allowance. This is a real improvement to the personal tax position, and most summaries leave it out.