Estonia Tax & Accounting — Deferred CIT, VAT 24% & Monthly e-Filing

Estonia applies corporate income tax (CIT) at 22% only when profits are distributed as dividends (since 1 January 2025). Profits retained within the company — whether reinvested in operations, held as cash, or used for capital expenditure — are not taxed. This deferral mechanism is unique among EU member states and allows companies to accumulate capital tax-free indefinitely. The 22% rate uses the 22/78 gross-up: distributing 78 EUR net to shareholders costs 22 EUR CIT, making the effective rate ≈28.2% on net profit distributed.

VAT registration becomes mandatory once cumulative taxable turnover in Estonia exceeds €40,000 in a calendar year. The standard VAT rate is 24% (raised from 22% effective 1 July 2025; prior rate was 22% from 1 January 2024, 20% before that). Voluntary registration is possible below this threshold. EU B2B transactions follow reverse-charge rules. INNOVA's accounting team files monthly or quarterly VAT returns through the e-Tax/e-Customs portal on the client's behalf.

All Estonian OÜs must maintain double-entry bookkeeping under Estonian GAAP (aligned with IFRS for SMEs). Annual accounts must be filed with the e-Business Register within 6 months of financial year-end. Companies with turnover above €4 million or assets above €2 million require a statutory audit. Monthly payroll taxes (income tax 20%, social tax 33%) are due by the 10th of the following month. INNOVA provides full-service accounting.

When an Estonian OÜ pays dividends that have not previously borne corporate tax (i.e., first-time distributions), the 22% CIT is paid at company level (22/78 mechanics, since 1 January 2025). As of 2025, there is no withholding tax on dividends from Estonian companies — the 7% WHT that previously applied under the old 14% reduced-rate track was abolished on 1 January 2025 together with the 14% track itself. All distributions are now taxed solely at company level at 22/78. For non-EU shareholders, Estonia's treaty network (60+ treaties) provides additional protection. INNOVA models the full distribution tax cost before structuring.

Yes. If an Estonian OÜ receives dividends from an EU subsidiary where it holds at least 10% for 12+ months, those dividends can be received exempt from Estonian CIT. Conversely, dividends distributed by the Estonian OÜ to a qualifying EU parent are exempt from withholding tax. This makes Estonia an efficient EU holding jurisdiction, particularly for digital and IP-holding structures combined with the territorial CIT deferral model.