Estonia Tax FAQ: Everything You Need to Know

Estonia has one of the most innovative and entrepreneur-friendly tax systems in the world. Since 2000, Estonia has operated under a unique corporate tax model that only taxes distributed profits—not retained earnings. This means if you reinvest profits back into your business, you pay zero corporate tax. Only when you take money out as dividends or other distributions do you face the 20% corporate income tax.

For digital nomads, SaaS founders, and location-independent entrepreneurs, this system offers tremendous advantages. You can grow your business tax-free during the early years, compounding profits without the drag of annual corporate taxation. Combined with Estonia's fully digital infrastructure, straightforward VAT rules, and extensive network of double taxation treaties, it's no wonder over 100,000 e-residents from 170+ countries have chosen to establish Estonian companies.

However, Estonian taxation intersects with international tax obligations, VAT compliance, personal income tax in your country of residence, and permanent establishment considerations. This FAQ covers all 25 critical tax questions you need answers to—from how the 0% corporate tax really works to handling foreign currency invoices, VAT MOSS registration, distribution tax optimization, social tax requirements, and international compliance strategies.