Guide to Property Taxes in Estonia

Nonresidents are generally subject to Estonian income tax on specified income from Estonian sources, including income derived from real estate situated in Estonia. Individuals are generally taxed separately.

Income Tax

For 2026, the standard Estonian personal income tax rate is 22%.

Rental Income Tax

A nonresident individual earning rental income from Estonian real estate is generally subject to Estonian income tax at 22%.

Where rent is paid by an Estonian entity or another person required to withhold tax, 22% income tax is generally withheld from the gross rental payment. If the tax has been correctly withheld, the nonresident is generally not required to file an Estonian income tax return solely in respect of that rental income.

However, an important deduction is available for residential rental property. Where income is received under a qualifying residential lease agreement, 20% of the rental income can be deducted automatically to cover rental-related expenses. The taxpayer does not need to document actual expenses in order to claim this 20% deduction.

The 20% deduction cannot be applied directly by the payer when withholding tax. Therefore, where 22% has initially been withheld from gross rent, the nonresident must file an Estonian income tax return in order to claim the 20% residential rental deduction.

After the deduction, only 80% of qualifying residential rent is taxable at 22%, producing an effective income tax rate of 17.6% of gross rental income.

Capital Gains Tax

A nonresident is generally subject to Estonian income tax on taxable gains arising from the disposal of real estate situated in Estonia. The applicable individual income tax rate for 2026 is 22%.

The taxable capital gain is generally calculated as the selling price less the property's acquisition cost and qualifying expenses directly connected with the acquisition or disposal.

Certain exemptions are available. In particular, a qualifying residence may be sold tax-free, although the residence exemption is generally restricted where more than one residence is sold within a two-year period.

A gain from the sale of a qualifying summer cottage or garden house can also be exempt where the property has been owned for more than two years and the registered immovable does not exceed 0.25 hectares.

Corporate Taxation

Estonia operates a distinctive corporate income tax system under which companies generally do not pay corporate income tax merely because profits are earned and retained within the company.

Instead, corporate income tax is generally imposed when profits are distributed, including through dividends and certain deemed distributions or non-business expenses.

For 2026, the standard corporate income tax rate is 22/78 of the net amount distributed, equivalent to 22% of the gross pre-tax distributed profit.

Consequently, rental income and capital gains earned and retained by an Estonian company can generally remain untaxed at the corporate level until profits are distributed. When those profits are distributed, the company generally pays corporate income tax at the applicable 22/78 rate.

Transaction Costs

Property Holding Tax

Estonia does not impose a conventional annual property tax on the combined value of land and buildings. Instead, it levies an annual land tax (maamaks) based on the taxable value of the land. Buildings and other improvements are generally excluded from the land-tax valuation.

The applicable tax rate is determined by the local municipality within statutory limits. For 2026, the permitted annual rates are:

• Residential land: 0.1%–1.0% of taxable land value.
• Agricultural or other profit-yielding land: 0.1%–0.5%.
• Land designated for other purposes: 0.1%–2.0%.

A homeowner's land-tax incentive also exists, but from 2026 it is amount-based and determined by the municipality, up to €1,000. The relief generally requires the property to be the owner's registered permanent residence, so a nonresident holding an Estonian property purely as a rental investment should not generally assume that the homeowner exemption is available.