Estonia

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

All corporate income are tax exempt when earned but Estonia imposes a corporate income tax on all distributions (profit, gifts, inheritance, donations, etc.).
The tax system defines the tax rate and the share of the profits that the company can distribute. For 2007, the rate is 22% for a distribution of maximum 76% of the profit. The tax is to be reduced to 21/79 in 2008 and to 20/80 in 2009.
The distribution tax applies to resident companies and to permanent establishments of foreign companies.
Non-resident companies that do not have a permanent establishment are subject to a tax on their incomes derived from their activities; the rate is 24%.

   
Tax rate on long-term capital gains Capital gains are subject to the general corporation rules taxing incomes when distributed.
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies A 24% withholding tax applies on dividends paid to non-resident corporate shareholders holding less than 25% of the capital. If they share at least 25% of the capital, 0% withholding tax is assessed.
   
Tax rate on branches Branches are subject to the general corporation rules taxing incomes when distributed.




Income tax

Fiscal year The fiscal year begins on January 1st and ends on December 31st of the next year.
   
Income tax rate Individual income tax is charged at a flat rate of 22%, which is to be reduced by a further 1% each year until it reaches 20% in 2009.
   
Tax deductions or other allowances Many deductions are allowed, and some exemptions like certain capital gains, scholarships paid on the basis of law, fringe benefits, accommodation reimbursements for business trips, insurance contracts, compensation for the use of private vehicles, child allowances and other subsidies and compensation paid from the State.



VAT rates

Standard rates 18%
   
Reduced rates Reduced rates are 0% and 5%.
A lower 5% rate applies to some books, medicines and certain supplies of heating and energy.
The 0% rate applies to exports and supplies relating to international transport.
Are exempted of VAT leasing of immovable property, services of financial and credit institutions, insurance services, and medical and educational services.



Other important taxes


Name of tax
Rate
Gifts and inheritance tax  
23/77  
Land tax  
0.1% to 2.5%  


 

Accounting

Introduction
All Baltic States inclusive Estonia have the same accounting system.


General accounting principles
The main financial documents in Estonia are the balance sheet, the profit and loss account and the cash flow statement.
- Concerning the cash flow statement, it is necessary to take into account flows resulting from operations of investments, financial flows, liquid assets at the beginning and at the end of the accounting year and flows of any other activity.
- Each asset, liability, debt, authorized capital, liquid asset or financial results must be disclosed.
-The Estonian accounting practices are recognized internationally.

Obligations and publications
The publication is rarely used in Estonia.
But since 1997, some accounts of companies are disclosed to the public.

Certification and auditing
The control of accounts is made by audits, but drafting an audit report is not necessary.

Professionals and representative organizations
- The Ministry of Finance.



Useful links
the Estonian Investment Agency
the Tax Office in Estonia
Estonian Tax and Customs Board

Last modified in January 2007
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