Estonian resident companies and permanent establishments of the foreign entities (including branches) are subject to income tax only in respect of all distributed profits (both actual and deemed), including:
- corporate profits distributed in the tax period;
- gifts, donations and representation expenses;
- expenses and payments not related to business.
Fringe benefits are taxable at the level of employer. Employer pays income tax and social tax on fringe benefits.
All distributions are subject to income tax at the rate of 21% of the amount of taxable payment. The transfer of assets of the permanent establishment to its head office or to other companies is also treated like a distribution. As of January 1, 2009 dividends paid to non-residents are no longer subject to withholding tax at the general rate of 21%, irrespective of participation in the share capital of the distributing Estonian company. However, various withholding taxes may still apply to other payments to non-residents if they do not have a permanent establishment in Estonia or unless the tax treaties otherwise provide.
As the tax period of corporate entities is a month, the income tax shall be returned and paid monthly by the 10th day of the following month.
Additional information
Estonian Tax and Customs Board: http://www.emta.ee
Ministry of Finance: http://fin.ee/?id=621
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