An individual who is a resident of Estonia is liable to tax on worldwide income, irrespective of the origin of the income. Non-residents are taxed on their Estonian-source income.
Taxable income includes both active income, such as employment and business income, as well as passive income, such as capital gains, rents and royalties, interest, dividends, certain insurance proceeds, pensions, scholarships, grants, prizes and lottery winnings, etc. This list is not exhaustive; consequently, any income derived by a resident individual not falling within the above categories is taxable, unless a tax exemption is available.
Most items of personal income are taxed on a gross basis, mainly through withholding at source, whereas business income and capital gains are taxed on a net basis subject to certain conditions.
There are no special taxation rules for expatriates.
Personal income tax rates
Estonia has a proportional (i.e. flat) tax rate of 20%, which applies to all items of income derived by a resident taxpayer. From 2018 onwards, dividends that have been subject to the reduced rate of 14% at the level of the distributing Estonian company will have withholding tax (WHT) of 7% levied. Certain pension payments are subject to 10% income tax.
Local income taxes
There are no local taxes on income.