In case your company has made profit, it is possible to pay dividend to the shareholders. Shareholders receive dividends proportionately to the share of the company that they own.
NB! Before the company is allowed to pay dividend, the company’s share capital needs to be paid into the company bank account.
After you have made the share capital payment, please inform your e-Residency hub accountant, so we could formulate the changes in the company registration documents
Dividends are taxed with 20% corporate income tax.
Example: A company decides to spend €100,000 of its accumulated profit to make a dividend payment. This sum is divided in the following manner:
- €80,000 is paid out to company shareholders according to their shares of the company
- €20,000 € is paid as the Estonian company’s corporate income tax to the Estonian Tax and Customs Board (the tax payment is made no later than on the 10th day of the following calendar month)
In the case described above, the €80,000 which is received by the company’s shareholders, may be considered their income in the country where they are tax residents. It may therefore be taxed with a personal income tax in their country of residence. Please check with a tax advisor in your country of residence to find out if this applies to you.
In case your company pays regular dividends, a different methodology is used to calculate the taxes.
“Regular dividends” means that the company has paid a similar amount of dividends for 3 consecutive years. In such case, the corporate income tax on these regular dividends is 14%.
NB! This lower tax on dividends can only be used if the Estonian company is owned by another company and not by a physical person. So, in effect, most companies owned by e-residents can not use this lower dividend rate
Please contact your accountant at e-Residency Hub if you have any further questions about how the dividends that your Estonian company pays to its shareholders are taxed in Estonia.