Estonia: Taxes and Costs
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Taxes are high in Estonia
INDIVIDUAL TAXATION
Nonresident individuals earning income through renting out Estonian property are liable to pay income tax. Married couples are taxed separately but may file jointly.
INCOME TAX
Nonresidents are liable to pay taxes on their income from Estonian sources. A flat rate of 22% is imposed on taxable income in 2007. This rate will go down to 21% in 2008 and down to 20% in 2009. No deductions and personal allowances are given to nonresident taxpayers, although residents of other EU member states are granted the same deductions that Estonia offers to its residents, provided they received at least 75% of their taxable income from Estonia and they file tax returns.
Rental Income Tax
Income earned from rental payments is subject to the flat income tax rate of 22%. This is taxed by way of withholding, which are final taxes and does not obligate the nonresident recipient to file returns.
Capital Gains Tax
Capital gains are included in the computation for taxable income, and no special rate is applied. Instead, the standard rate of 22% is imposed. Income of nonresidents from the sale of property is subject to income tax by way of assessment. Taxable capital gain is generally computed as gross selling price less acquisition costs. Gains from the sale of a summer cottage or garden house are exempt if owned for more than 2 years.
PROPERTY TAXES
Land Tax
Land owners in Estonia are liable to pay an annual land tax, levied on the market value of the land. The rate is established by the municipal council and varies between 0.1% and 2.5%.
CORPORATE TAXATION
Income Tax
Corporate income in Estonia is not taxed if it is retained in the company. Once dividends are distributed, a flat rate of 22%, in 2007, is imposed on the gross income. This rate will go down to 21% in 2008 and 20% in 2009. Since the retained earnings are not taxed, there are no deductions for tax purposes.
Capital Gains
Capital gains of companies are not taxed separately in Estonia. The same rate that is applied to a company’s gross income is also applied to its capital gains. Also, capital gains are only taxable when a company distributes its income.
Estonia - more data and information
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