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A Guide on Dividends in Estonia

A Guide on Dividends in Estonia

The dividend system in Estonia is a unique one, full of particular provisions varying from one case to the other, depending on whether the person in question is a resident legal person or a foreign legal entity having a permanent establishment in Estonia. The withholding tax is not applied to dividends in this country; however the companies are taxed at a rate of 21% when distributing the revenues to the shareholders. One of our attorneys in Estonia can explain in more detail what is the Estonian policy regarding dividends and how does the law apply to your particular situation in this country. 

How dividends work in Estonia

According to the Company Code in Estonia, corporations can choose to distribute their profits as dividends at the end of the financial year. Before paying the dividends to the shareholders, a company must check that it is in compliance with the provisions of the law. The members of the board must have valid authorizations and companies who have a share capital in Kroons must convert it in Euro before being able to pay the dividends

If you open a company in Estonia without a share capital, before you will be able to pay dividends you will have to submit a share capital and register with the Business Register in Estonia. One of our Estonian lawyers is ready to help you register your company and submit the initial capital.

Details concerning taxation of dividends in Estonia

There are multiple situations and in each of them, different provisions apply regarding the taxation of dividends in Estonia. Natural persons in Estonia do not need either to declare or to pay any tax for the dividends received from legal entities. Although there is no tax imposed on dividends in Estonia, however the dividends payed by the Estonian companies are charged through the Corporate Income Tax. This tax is levied from the enterprises at a rate of 20% of the gross amount of the profit distruibution, when the dividends are payed to the shareholders. The Tax Act in Estonia provides as well several cases of exemptions for resident companies and foreign companies who act through a permanent establishment in Estonia and who receive payments from abroad. Most of the relevant regulations concerning the taxation of dividends from abroad can be found in the double tax treaties signed between Estonia and other countries. 

Don’t hesitate to contact our law firm in Estonia in order to find out trustworthy information concerning on how the dividends work in this country.