Withholding agents must withhold CIT from certain payments. Withholding agents include resident legal entities, resident individuals registered as sole proprietorships or acting as employers, and non-residents having a PE or acting as employers in Estonia. The tax must be reported and paid by the tenth day of the month following the payment. CIT is not withheld from payments to resident companies, registered sole proprietorships, and registered PEs of non-resident companies. The following rules are in place with respect to payments that are subject to WHT:
- There is no WHT on dividends. As an exception, 7% WHT applies to dividends paid to resident and non-resident individuals if the distribution has been subject to the reduced CIT rate at the hands of the paying company.
- There is no WHT on interest payments to non-residents. Interest payments to resident individuals are subject to a 20% WHT rate.
- Royalties (including payments for the use of industrial, commercial, or scientific equipment) paid to non-residents are generally subject to a 10% WHT rate under domestic law, but reduced rates may be available under double tax treaties (DTTs). Certain royalty payments to associated EU and Swiss companies that meet certain conditions are exempt from WHT.
- Rental payments to non-residents for the use of immovable property located in Estonia and movable property subject to registration in Estonia (excluding payments for the use of industrial, commercial, or scientific equipment) are subject to a 20% WHT rate under domestic law, but DTTs may exempt payments for the use of movable property from WHT.
- Royalties and rental payments to resident individuals are subject to a 20% WHT rate.
- Payments to non-resident companies for services provided in Estonia, including management and consultancy fees, are subject to a 10% WHT rate under domestic law, but may be exempt under DTTs. Service fee payments to tax haven entities are always subject to a 20% WHT rate.
- Salaries, directors’ fees, and service fees paid to individuals are subject to a 20% WHT rate under domestic law, but DTTs may exempt service fee payments to non-resident individuals from WHT.
- Payments for the activities of non-resident artistes or sportsmen carried out in Estonia are subject to a 10% WHT rate.
- Certain pensions, insurance benefits, scholarships, prizes, lottery winnings, etc. paid to non-residents and resident individuals are subject to a 20% WHT rate under domestic law.
For non-residents without a PE in Estonia, the tax withheld from these payments at domestic or treaty rates constitutes final tax in terms of their Estonian-source income, and they do not have any tax reporting requirements in Estonia.
For certain types of Estonian-source income, non-residents are liable under Estonian domestic law to self-assess their Estonian tax and submit a tax return to the Estonian tax authorities. These types of income include:
- Taxable capital gains.
- Profits derived from business conducted in Estonia without a registered PE.
- Other items of income from which tax was not withheld but should have been withheld.
From 2019, Estonia has effective tax treaties with the territories listed in the table below. A treaty has been signed with Morocco, but this is not yet effective.
The following WHT rates apply to dividends, interest, and royalties paid to a recipient or beneficial owner resident in a tax treaty country. The lower of the domestic or the treaty rate is given.
|Dividends (1)||Interest (2)||Royalties (3)|
|China, People’s Republic of||0||0||10|
|Ireland, Republic of||0||0||0 (7)|
|Isle of Man||0/0||0||0|
|Korea, Republic of||0||0||5/10 (4)|
|United Arab Emirates||0/0||0||0|
|United Kingdom||0||0||0 (7)|
|United States||0||0||5/10 (4)|
- Under the domestic law, the rate is nil for all non-resident corporate shareholders and 7% for non-resident individual shareholders if the dividend distribution has been taxed with the reduced CIT rate at the hands of the distributing company.
- Under the domestic law, the rate is nil for all non-resident individual and corporate creditors.
- The rate is nil for arm’s-length royalties paid to an associated EU or Swiss company if certain conditions are met.
- The lower 5% rate applies to royalties paid for the use of industrial, commercial, or scientific equipment.
- The lower 5% rate applies to royalties paid for the use of copyright royalties, excluding software royalties.
- The lower 8% rate applies to royalties paid for the use of industrial, commercial, or scientific equipment.
- The definition of royalties precludes fees paid for the use of equipment, and royalties are exempt from WHT in Estonia.