Blog

Estonia’s Tax System Most Competitive In The World

December 19, 2023

Estonia has secured the top spot in the International Tax Competitiveness Index for the tenth consecutive year. Even with upcoming modifications in its tax regulations and rates, Estonia will remain to have the most competitive tax system in the world.

In 2023, Estonia's tax system was ranked highest in the International Tax Competitiveness Index (ICTI), marking it as the most competitive tax system in the world among OECD nations for the tenth consecutive year.

A robust tax code is crucial for a nation's economic health. It enables taxpayers to comply easily, fostering economic growth and boosting public revenue. In contrast, inefficient tax systems can be burdensome, lead to skewed economic choices, and negatively impact local economies. This is the stance of the Tax Foundation, a US-based tax policy organization and the creator of the ICTI.

Tax systems vary widely among OECD countries, necessitating comparisons to assess their effectiveness. The ITCI, developed by the Tax Foundation, evaluates over 40 tax policy elements to determine the competitiveness and neutrality of national tax codes. This assessment includes corporate and individual income taxes, consumption and property taxes, and the treatment of foreign-earned profits. 

@TaxFoundation

Estonia's high ranking in 2023 is attributed to several aspects of its tax system:

  1. A 20% corporate tax rate on cash-flow, applicable only to distributed profits.
  2. A flat 20% individual income tax, exempting personal dividend income.
  3. Property tax limited to land value, not on overall real estate or capital.
  4. A network of double tax treaties aiding local corporations with foreign tax credits.

Estonian citizens, tax residents, and e-residents benefit from this system. While Estonia isn't a tax haven and e-Residency doesn't exempt from dual tax residency or foreign taxes, its straightforward tax regime and 62 tax treaties offer significant benefits for international entrepreneurs. This includes a transparent business environment and efficient digital services, minimizing compliance costs and tax filing time. E-residents can further align their companies with Estonia's tax residency by establishing a substantial business presence there, such as renting office space, employing staff, registering assets, and conducting board meetings in Estonia.

Consulting a tax specialist is recommended for advice on international tax laws and optimizing corporate tax structures based on geographical location and business operations.

Years of changes in the tax system: 2024-2026

Regarding upcoming tax changes in Estonia, the government has announced tax law revisions to be implemented between 2024 and 2025. These changes primarily involve tax rate increases and the removal of some exemptions, but the tax system will remain straightforward and transparent.

Key upcoming changes for e-Resident businesses include:

From January 1, 2024

20% to 22%, affecting e-resident businesses selling to Estonian consumers and potentially leading to price adjustments.

From January 1, 2025

From January 1, 2025, the corporate income tax rate will increase from 20% to 22%, and the reduced 14% rate will be abolished, affecting profit distribution costs. The personal income tax rate will also increase to 22%, and a uniform tax-free income of 700 euros per month will replace the current system, potentially impacting net salaries and wage dynamics.

Other changes will involve increased CIT payments for credit institutions, higher reduced VAT rates for certain services, progressively rising gambling taxes, and new car and sugar taxes in 2025.

All proposed changes can be found on the Estonian Tax and Customs Board website.

Despite these amendments, there will be no new capital gains or property transfer taxes, and the property tax will continue to apply only to land value. Due to these factors and the ongoing efficiency of Estonia's tax code, the country is likely to remain at the forefront of international tax competitiveness and neutrality within the OECD.

Want to know more about your options? Interested in accessing the EU free market? You are always welcome to book a free 30 minute consultation with us here. Contact us via email at info@nomadbusinesssolutions.eu or visit our website here.

blog posts

E-Resident Dominik Panosch proved that the fastest way to create a company is to use Estonian e-services and establish your company in Estonia. He broke the world record by creating his own start-up company on the 13th of June at London Tech Week.  Panosch, an Estonian e-resident from Austria, took only 15 minutes and 33 seconds […]

E-Residency, a ground-breaking digital identity initiative by the Estonian government, has sparked interest across the globe. It allows individuals outside Estonia to securely verify their identity online, facilitating access to a plethora of public and private Estonian e-services, as well as the broader European Union (EU) market. This digital program is not a one-size-fits-all solution; […]

Estonia e-Residency program has garnered significant attention for its innovative approach to attracting global entrepreneurs. Here is a detailed breakdown of the process, costs, and benefits: Estonia e-Residency Registration Steps: 1. Apply Online: Go to the official e-Residency application portal. 2. Fill in the Application: Provide personal information, a passport photo, and a brief motivation […]

We are Katlin and Marie. We own and run Nomad Business Solutions. A business dedicated to helping entrepreneurs and business owners achieve their dreams of expanding throughout Europe with ease. Earlier years We were born and grew up on the small island of Saaremaa. The largest island in Estonia, famous for, among other things, its […]

Embarking on the journey to establish a business in the European Union (EU) comes with a wealth of opportunities and choices. Aspiring entrepreneurs often find themselves at a crossroads, considering various EU member states as potential business hubs. In this blog post, we take you on a comprehensive tour, we give you detailed information and […]

In the ever-expanding global market, non-EU entrepreneurs are seeking innovative strategies to access the lucrative European Union (EU) market. Estonia’s groundbreaking e-Residency program has emerged as a game-changing solution. This is by offering a streamlined pathway for non-EU entrepreneurs to establish a presence in the EU. This blog post delves into the market entry strategies […]

In today’s globalized economy, entrepreneurs from around the world seek opportunities to expand their businesses and tap into new markets. For non-EU entrepreneurs, accessing the European Union (EU) market can be a game-changer. Estonia’s e-residency program and EU company registration provide a unique pathway for non-EU entrepreneurs. This allows to establish a presence in the […]

Access to the European Union (EU) free market presents a myriad of opportunities for non-EU entrepreneurs looking to expand their businesses globally. With its vast consumer base, advanced infrastructure, and favorable business environment, the EU offers a fertile ground for growth and success. In this blog post, we will explore ten ways access to the […]

Becoming an e-Resident of Estonia offers a unique opportunity for entrepreneurs and digital nomads to access the benefits of the EU market and establish a business presence within the European Union. This step-by-step guide will walk you through the process of becoming an e-Resident, from application to utilizing the privileges offered by this innovative program. […]

In today’s interconnected world, expanding your business globally has become more accessible than ever. One country that stands out for its forward-thinking approach is Estonia, with its innovative e-Residency program. This program allows entrepreneurs from around the world to establish a presence in the European Union (EU) quickly and easily. In this blog post, we’ll […]

In an era where remote work and digital entrepreneurship are gaining momentum, choosing the right digital nomad program is crucial for entrepreneurs looking to establish and operate their businesses globally. While several countries offer digital nomad programs, Estonian e-Residency stands out for its unique features and advantages. In this blog post, we will compare Estonian […]

In today’s interconnected world, non-EU entrepreneurs are increasingly exploring the advantages of establishing an EU company. The European Union offers a plethora of benefits, from market access and credibility to simplified business regulations and international expansion opportunities. In this blog post, we will delve into the true facts, examples, and actionable tips to highlight why […]

Running a remote EU business has become increasingly popular in recent years, thanks to advances in technology and the rise of the digital economy. Estonia, a small country located in Northern Europe, is a leading example of this trend. Its innovative e-Residency program allows individuals from all over the world to establish a digital identity and […]

Nearly 1.3 million people live in the Republic of Estonia, which is located in Northern Europe along the Baltic Sea. Tallinn, Estonia’s capital, is just 60 kilometers (40 miles) south of Helsinki, across the Gulf of Finland, on the coast of the Baltic Sea.  Tallinn has approximately 435 thousand people living there. Tartu, Narva, and […]

Are you new to the world of e-Residency? Or are you interested to find out how it could help you and your business? Either way, Estonia’s e-residency with its wide range of benefits has something for everyone. Did you know that there are over 100,000 Estonian e-residents with more than 25,000 businesses? All these people […]

E-Residency is a modern, cutting-edge concept that is perfect for remote-working entrepreneurs. As the first country to offer full e-residency, Estonia has pioneered this program. 

Becoming an Estonian e-Resident can have many tax benefits.  You will likely be able to pay a lower rate of income tax than you would do in your home country, while enjoying more generous allowances in terms of corporation tax too. In fact, Estonia currently ranks first in the International Tax Competitiveness Index, while the Washington-based […]

If you wish to become an e-resident of Estonia and plan to travel here, we would like to share with you some tips that will help you to win our hearts right away and start doing business in Estonia! Let’s get acquainted with Estonia’s etiquette and culture! 1.Learn at least one phrase or word in Estonian […]

Start your company in Europe with the help of Estonia's e-Residency program

In terms of digital public services, Estonia continues to be a strong leader and ranks first in the EU. In recent years, e-government users have steadily risen to account for 89% of all internet users in the nation. There are over 200 online services, the government runs 99% paperless, and more than half of the […]

In the last blogpost we spoke about how Estonia became a digital nation. It only seemed fit to give a bit more background about Estonia’s history. Stay with us and you will find out what has cultivated us to become who we are today. How we became who we are today Estonians are fighters – […]

To give you the best browsing experience possible and display relevant content, our web page uses cookies. By continuing to browse the website you agree to the use of cookies. You can delete the cookies, but please be aware that parts of our site are not working without them.

Read more about the cookies we use.