Taxes and Tax Schemes in Estonia | What You Need to Know in 2025

Estonia, a country renowned for its digital innovation, beautiful nature, and e-residency program, is also home to a unique and straightforward tax system. Located in Northern Europe, Estonia boasts one of the most competitive tax systems in the developed world. The country is known for its advanced digital infrastructure, thriving startup ecosystem, and business-friendly environment.

Estonia's economy has shown resilience and growth in recent years, with a focus on digital technologies, IT services, and e-governance. It remains a significant player in the Baltic region, with a strong emphasis on entrepreneurship and innovation.

The expat culture in Estonia is growing, with many foreigners drawn to the country's digital nomad visa, high quality of life, and modern approach to governance. Major cities like Tallinn and Tartu are particularly popular among expats, offering a blend of medieval charm and cutting-edge technology.

Remember, tax laws can change, and individual circumstances vary. Always consult with a qualified tax advisor for personalized advice.

‍

Estonia Income Tax

Estonia employs a flat income tax system. As of 2025, the tax rate is as follows:

There is a basic exemption (tax-free amount) of €654 per month or €7,848 per year. The basic exemption is gradually reduced for annual income exceeding €14,400, reaching zero at an income of €25,200.

If you want to have a better understanding of the taxes you should pay on personal income in Estonia, you can use the personal tax calculator in the Taxation section of the Estonia page.

‍

Estonia Tax on Overseas Income

Estonia taxes its residents on their worldwide income. This means that if you're considered a tax resident in Estonia, you'll need to declare and potentially pay taxes on income earned both within Estonia and abroad.

You're considered a tax resident if:

• Your place of residence is in Estonia
• You stay in Estonia for at least 183 days over the course of a consecutive 12-month period

Non-residents are only taxed on income earned within Estonia.

‍

Estonia Tax on Investments

Investment income in Estonia is generally subject to the flat tax rate of 20%. This applies to most forms of investment income, including:

• Interest from bonds and bank accounts
• Dividends from stocks
• Capital gains from the sale of financial instruments

However, there is a unique aspect to Estonia's corporate taxation system: companies only pay tax on distributed profits (dividends), not on retained or reinvested profits.

Summary:

• General flat tax rate of 20% on investment income
• Applies to interest, dividends, and capital gains
• Companies only taxed on distributed profits

‍

Estonia Capital Gains Tax

Capital gains in Estonia are subject to the 20% flat tax rate. This applies to gains from the sale of:

• Real estate
• Securities
• Other assets

However, there are some exemptions:

• The sale of a primary residence is generally exempt from capital gains tax if it has been used as the main residence for at least two years
• Gains from the sale of inherited property are tax-exempt

‍

Estonia Special Tax Regimes

Estonia offers several unique tax features that attract foreign investment and talent:

1. E-Residency Program: While not a tax regime per se, this program allows non-residents to establish and manage an Estonian company online, benefiting from Estonia's business-friendly tax system.
2. Corporate Tax Deferral: Companies only pay tax on distributed profits, allowing for tax-free reinvestment of earnings.
3. Digital Nomad Visa: This visa allows remote workers to live in Estonia for up to a year, potentially benefiting from Estonia's tax system.

Summary:

• E-Residency Program for easy business setup
• Corporate tax only on distributed profits
• Digital Nomad Visa for remote workers

‍

Regional Comparison

Tax Planning for Estonia

When planning your taxes in Estonia, consider the following strategies:

1. Utilize the basic exemption: Ensure you're taking full advantage of the tax-free amount.
2. Consider timing of dividend distributions: If you own a company, plan dividend distributions strategically to optimize tax liability.
3. Explore e-residency: If you're a non-resident, e-residency could provide access to Estonia's business-friendly environment.
4. Seek professional advice: While simpler than many countries, Estonia's tax system still has nuances that a professional can help navigate.
5. Keep detailed records: Maintain comprehensive documentation of your income and expenses to ensure accurate reporting.

‍