What Businesses and Investors Need to Know
As of January 1, 2025, Estonia has introduced significant changes to dividend taxation. If you’re a business owner or investor, here’s what you need to know about the new rules.
1. A Unified Tax Rate of 22%
Going forward, all dividends are subject to a flat income tax rate of 22%. This tax is calculated as 22/78 of the net dividend paid out. For example, if a company distributes €10,000 in dividends, the corporate tax will be:
€10,000 × 22/78 = €2,820.51
This means that to distribute €10,000 net, the company must first earn approximately €12,820 in profits before taxes.
2. No More Lower Tax Rates
Previously, companies could benefit from a reduced 14% tax rate on regularly paid dividends. However, this preferential tax rate has been abolished. From 2025 onwards, all dividends—whether regular or occasional—are taxed at the same 22% rate.
3. No Additional Tax for Individual Shareholders
Here’s some good news for individual investors!
Until now, Estonian companies that paid out dividends at the 14% rate had to withhold an additional 7% tax for individual shareholders. This extra tax no longer applies. Now, all dividend taxes are settled at the corporate level, so individuals receive their dividends tax-free in Estonia.
What This Means for You
✅ Businesses no longer have to deal with different tax rates for regular and irregular dividends.
✅ Investors benefit from a simpler system with no extra personal tax on dividends.
✅ Corporate tax obligations remain competitive compared to other European countries.
