---
title: Income Tax in Estonia
description: Explore the guide on Income Tax in Estonia. Learn about personal and corporate tax, distributed profits, employer obligations, tax rates, deadlines, and exemptions
---

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# Income Tax in Estonia

In Estonia, income tax is divided into:

- personal income tax
- corporate income tax (also applies to permanent establishments of non-residents and employers granting special benefits)

Employers are required to withhold income tax from employee salaries and remit it to the Tax and Customs Board (MTA).

📊 Corporate Income Tax

### Key Principle

Estonia applies a unique model where only distributed profits are taxed.  
Undistributed or reinvested profits are tax-free.

#### Taxable Transactions

**Companies must pay income tax on:**

- Distributed profits (e.g. dividends);
- Non-business-related income and payments;
- Gifts, donations, representation costs;
- Employee benefits;
- Reduction of capital, share buy-backs, or liquidation dividends exceeding equity contributions.

Tax Rate and Filing

- Tax rate: 22/78 of the net distributed amount (2025)
- Tax period: monthly
- TSD declaration deadline: 10th of the following month
- Filing via e-MTA or regional tax office

 

#### 👨‍💼 Income Tax for Sole Proprietors (FIE)

If you operate as a sole proprietor, you must pay tax on your net business income (income minus deductible business expenses).

- Tax rate: 22%
- Tax period: calendar year
- Declaration deadline: April 30 of the following year

Advance Payments

- Due by September 15 and December 15
- Equal to 25% of the previous year’s income tax from business activity

 

#### 👷 Income Tax on Employee Wages

Employers must withhold income tax from:

- gross salaries,
- bonuses,
- vacation pay,
- other wage-related payments.

Tax rate (2025): 22%

**Tax-free Allowance**

A monthly non-taxable minimum applies to all employees (2025):

- €654 per month, or
- €7848 per year

If the employee submits an application for the tax-free allowance, the employer can deduct this amount from the taxable base.

Additional Obligations

In addition to income tax, employers must also:

- Withhold mandatory funded pension contributions (if applicable)
- Withhold unemployment insurance contributions
- Pay social tax on gross wages

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