Dividend Tax in Estonia 2026: Complete Guide for OÜ Owners

How Are Dividends Taxed in Estonia?

Estonia has one of the most business-friendly corporate tax systems in the EU. Unlike most countries that tax corporate profits annually, Estonia only taxes profits when they are distributed — typically as dividends.

This guide explains exactly how dividend taxation works in 2026, the different rates, who pays the tax, and how dividends compare to salary.

The Fundamentals: Corporate Income Tax on Dividends

When an Estonian OÜ distributes dividends, the company pays corporate income tax (CIT) on the distributed amount. The shareholders themselves do not pay additional income tax on dividends received from an Estonian company (for Estonian resident shareholders).

Standard Rate: 22%

From January 1, 2025, the standard corporate income tax rate on dividends increased from 20% to 22%.

The tax is calculated as 22/78 of the net dividend amount (or equivalently, 22% of the gross pre-tax amount).

Example:

• You want shareholders to receive €10,000 net
• Gross dividend before tax: €10,000 ÷ 0.78 = €12,821
• Corporate income tax: €12,821 × 22% = €2,821
• Net to shareholder: €12,821 − €2,821 = €10,000

Alternatively, if the board declares a gross dividend of €10,000:

• Corporate income tax: €10,000 × 22% = €2,200
• Net to shareholder: €10,000 − €2,200 = €7,800

The Reduced Rate: 14% for Regular Dividends

Estonian law provides a reduced 14% CIT rate for companies that distribute dividends regularly — meaning the same amount or more in each of at least 3 consecutive calendar years.

Conditions for the 14% rate:

1. The company distributed dividends in the 3 preceding calendar years
2. Each year's dividends were at least equal to the previous year's amount

Example of 14% eligibility:

• 2023: distributed €5,000 → taxed at 20%
• 2024: distributed €5,000 → taxed at 20%
• 2025: distributed €5,000 → now eligible for 14%

At 14%, the effective rate on the net dividend is 14/86 = 16.3% (compared to 28.2% at the standard rate).

Important: The 14% rate only applies to the portion of dividends that equals prior-year amounts. Any additional amount above the regular amount is taxed at 22%.

Who Pays the Tax and When?

The company pays corporate income tax — not the shareholder. This is fundamentally different from most other countries.

Timing

Corporate income tax on dividends must be paid to EMTA by the 10th of the month following the month of dividend payment.

Example:

• Board declares dividends on March 5, 2026
• Shareholder receives €7,800 net on March 15, 2026
• Corporate income tax of €2,200 must be paid by April 10, 2026

Filing

The TSD declaration (Annex 7) must also be filed by April 10, reporting the dividend payment.

Withholding Tax for Non-Resident Shareholders

If your Estonian OÜ has non-resident shareholders (e.g., shareholders who are not Estonian residents), a withholding tax of 7% on the net dividend applies.

The effective tax burden for a non-resident shareholder therefore is:

• 22% corporate income tax (company level) +
• 7% withholding tax on the net amount (company level, withheld from shareholder)

However, double taxation treaties (DTTs) between Estonia and many countries reduce or eliminate this 7% withholding. Estonia has DTTs with over 60 countries, including:

• UK: 0% withholding on dividends for companies holding >25% stake
• Germany: 5% (for qualifying companies) or 15%
• USA: 15% (or 5% for companies holding >10%)
• Finland: 5% (for companies) or 15%

Always check the applicable treaty for your specific situation.

Dividends vs Salary: Which Is Better?

This is one of the most common questions from e-Residents. The answer depends on your personal situation, but here is the core comparison:

Salary (Director's Fee)

• Income tax: 20% (withheld from gross)
• Social tax: 33% (paid by company on gross)
• Unemployment insurance: 1.6% (employee) + 0.8% (employer)
• Total employer cost per €1 net salary received: approximately €1.79

Dividends (Standard Rate)

• Corporate income tax: 22% (company level, 22/78 of net)
• No social tax
• No income tax for Estonian residents
• Company cost per €1 net dividend paid: approximately €1.28

Dividends are generally more tax-efficient when you do not need social insurance benefits (e.g., state pension, health insurance) from Estonia.

When Salary Makes Sense

• You need Estonian social insurance coverage (health insurance, pension accrual)
• You live in a country that requires proof of employment income
• Your company needs to show salary expenses to reduce taxable profit in another jurisdiction

Distributing Retained Profits

Estonian OÜs can distribute profits from any prior year — not just the current year. This means you can accumulate profits tax-free and distribute them strategically.

Requirements for dividend distribution:

1. The company must have distributable profit (retained earnings from prior years)
2. The company must remain solvent after distribution (assets ≥ liabilities + minimum share capital)
3. A shareholders' resolution must be passed approving the distribution
4. The share capital minimum (€2,500 for OÜ) must remain intact

How to Pay Dividends from Your Estonian OÜ

Step 1: Verify Retained Earnings

Check your accounting software or ask your accountant to confirm the distributable profit available.

Step 2: Pass a Shareholders' Resolution

Hold a (written) general meeting and adopt a resolution specifying:

• The total amount to be distributed
• The record date
• The payment date

For single-member OÜs, the sole shareholder can sign a written resolution without a formal meeting.

Step 3: Make the Transfer

Transfer the net amount (after CIT) to shareholders' bank accounts.

Step 4: File TSD Annex 7 and Pay CIT

By the 10th of the following month:

1. File TSD Annex 7 via e-MTA reporting the dividend payment
2. Pay the corporate income tax to EMTA's bank account

Frequently Asked Questions

Does Estonia tax dividends received from foreign subsidiaries?

Generally no. Dividends received by an Estonian company from a foreign subsidiary in which it holds at least 10% are exempt from Estonian corporate income tax (participation exemption).

Can I reinvest profits without paying tax?

Yes — this is the central advantage of the Estonian tax system. Profits retained and reinvested in the company are not taxed. Tax is only triggered upon distribution.

What records do I need to keep?

Keep the shareholders' resolution, board decision, and payment documentation for at least 7 years. EMTA can audit dividend payments.

Do I need a notary to distribute dividends?

No. Dividend distributions only require a shareholders' resolution, which can be signed digitally (no notary required for most OÜ distributions).

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This guide is for informational purposes only and does not constitute tax advice. Rates are current for 2026 — always verify with EMTA or a licensed Estonian tax advisor.