Corporate tax in Estonia 2026: 0% on retained profit, 22/78 on dividends
Estonia does not tax company profit as it is earned. An Estonian OÜ pays no corporate income tax on profit it keeps and reinvests – tax is only triggered when profit is distributed, mainly as dividends, at 22/78. Here is how that works in 2026, with a worked example.
This post is for foreign owners and e-residents running an Estonian OÜ, and for anyone comparing Estonia’s tax system with their home country’s before deciding where to set up. Whether you already have an Estonian company or are still weighing one, here is what actually happens to your profit – in plain terms, with 2026 numbers.
How Estonian corporate tax works
Estonia’s corporate tax system is unusual: profit is not taxed as it is earned. Your company can make a profit, keep it in the business, and reinvest it in equipment, hiring, marketing or growth – and none of it is taxed while it stays in the company.
Tax is triggered only when profit leaves the company – most commonly as a dividend to the owner. The same principle applies to other equity distributions, such as a reduction of share capital beyond what was originally paid in.
In practice, the timing of the tax is in your hands: profit you reinvest is untaxed, and profit you take out is taxed once, when you take it out.
Dividend tax 2026: 22/78, with an example
When an Estonian company distributes a dividend, the company itself pays corporate income tax of 22/78 of the net amount paid out, which equals 22% of the gross amount. The company pays the tax, not the shareholder: a private individual who receives a dividend gets it in full, with no further personal income tax due on it in Estonia.
Two things that used to apply are gone as of 2025:
- the reduced 14/86 rate for regularly paid dividends;
- the 7% income tax withheld from dividends paid to private individuals.
Worked example. Suppose you want to pay out a dividend of €7,800 to the owner (the net amount the owner receives):
- Corporate income tax: 7,800 × 22/78 = €2,200
- Total cost to the company: 7,800 + 2,200 = €10,000
- The owner receives: €7,800
Looked at the other way: out of €10,000 of profit, 22% (€2,200) becomes tax, and 78% (€7,800) goes to the owner.
Dividends are reported on annex 7 of the payroll tax return (TSD) and, per recipient, on form INF 1. The tax is declared and paid by the 10th of the month after the month of payment. A company can pay dividends only on the basis of an approved annual report, and only out of undistributed profit.
Other rates you will meet
Corporate tax is only part of the picture. Depending on how your company operates, you will also run into:
- Personal income tax: 22%. This is the withholding rate that applies to salaries and most other personal payments in Estonia.
- Social tax: 33%, paid by the employer on salaries. There is a monthly minimum obligation, based on a monthly rate of €886, which works out to a minimum social tax cost of €292.38 per month per employee – even for part-time or low-paid work.
- VAT: 24% standard rate, with reduced rates of 13% for accommodation and 9% for books, press and medicines. A company must register for VAT once its taxable turnover crosses the registration threshold.
None of these change how retained profit is taxed. That stays at 0%, whatever the company’s income tax, social tax or VAT position.
What this means for your accounting
Because Estonian corporate tax is triggered only on distribution, clean books are what let you use the system properly: knowing how much undistributed profit is available for a dividend, filing the TSD and INF 1 correctly and on time, and getting the salary-versus-dividend mix right if you also work in the company. (The Estonian tax authority can reclassify dividends as disguised salary if the owner works in the business but is paid only in dividends.)
If you own or manage an Estonian company from abroad, see our accounting for e-residents and foreign owners service, or talk to us about your own situation through tax and business advisory.
