Tax
A near-flat income tax and tax on distributed profits only
Estonia is known for its simple near-flat income tax and its corporate tax that falls only on distributed profits, leaving reinvested earnings untaxed. Standard VAT rose to 22% in 2024.
Key rules
- Personal income tax is a near-flat rate (rising to 22% in 2025).
- Corporate income tax is charged only when profits are distributed.
- Standard VAT is 22% following the 2024 increase.
Governing law
- Income Tax Act (Tulumaksuseadus)
- Value Added Tax Act
Penalties and consequences
- Interest and fines for late or incorrect returns
In practice
The distributed-profit model is Estonia's signature tax feature, strongly favouring companies that reinvest rather than pay dividends.