Once you experience the digitally-native Estonian business accounting systems, you’ll never want to go back to what you knew before! However, it’s important to understand and recognize that the rules, critical dates, expectations, sanctions, and conventions may well be different from what you are used to, in various ways - which is why it’s essential to seek professional guidance.

There are few truly universal truths in global business regulation, other than the fact that ignorance of requirements is rarely an acceptable excuse for non-compliance.

Issuing invoices correctly is a fundamental of business accounting, especially when trading internationally. Estonia has clear rules to ensure transparency, and help you get it right.

Key Elements of an Invoice

According to the Estonian Tax and Customs Board (EMTA), an invoice must include the following:

• The issuer’s and recipient’s names, addresses, and VAT numbers (if applicable).

• The date the invoice was issued and a unique sequential number for tracking.

• A detailed description of goods or services provided, including quantities, prices, and the total amount charged.

• The VAT rate applied and the VAT amount (if the issuer is VAT-registered), or a clear indication of exemption.

• Terms of payment, including due date and bank details.

For VAT-exempt services, it is mandatory to state the legal reason for the exemption. Digital tools commonly used by e-residents, like GroüHub’s e-invoicing platform, streamline compliance by automatically formatting invoices to meet Estonian and EU requirements.

Estonia’s highly digitized e-tax system makes it simple for businesses to meet reporting obligations. Whether you’re filing VAT, submitting annual reports, or updating your profit records, the process is seamless.

Monthly Employment Declarations: if you have employees in Estonia, the TDS report (related to the employment taxes due in Estonia) has to be submitted by the 10th of each month

Monthly VAT Declarations: for each month, VAT-registered companies must submit their VAT returns by the 20th of the following month. This includes listing sales, purchases, and any reverse-charge transactions. E-residents can do this effortlessly via the online tax portal using their e-residency digital ID card. VAT must be declared monthly, even if there is zero tax to pay.

Quarterly Intra-EU VAT Declarations: if your company is selling to private individuals within the EU and is registered on the OSS scheme, the Intra-EU VAT declaration is due for each calendar quarter on the 20th of the following month

Quarterly Financial Reporting: Depending on the company size and activity, some businesses may opt or be required to file quarterly updates about their financial status, including balance sheets and income statements. GroüHub’s platform provides tools to automate much of this, helping you stay organized without unnecessary manual work.

Annual Reporting: once your company’s financial year has ended, you have up to 6 months to file the previous year's annual report. For most companies, whose financial year ends on 31.12, this means the deadline for the annual report submission is 30.06. The Annual Report includes a summary of financial activities, balance sheets, and profit/loss statements, and most e-residents rely on professional accounting services like GroüHub’s to ensure accuracy and compliance with Estonian law.

Digital accounting simplifies these processes by offering comprehensive accounting solutions tailored to e-resident companies. From automated VAT calculations to reminders for filing deadlines, these tools take much of the administrative burden off entrepreneurs.

Estonia separates company taxation and personal taxation very clearly. Corporate Income Tax (CIT) – company level

• Estonia’s corporate system is known for taxing profit distribution rather than annual accounting profit: profits are generally untaxed until distributed.

• From 2025, distributed profits/dividends are taxed at 22/78 at company level (often described as “22% on the gross distribution”).

• Certain non-business expenses (e.g., fringe benefits, certain gifts/donations/representation, etc.) can be treated similarly to distributions for taxation purposes. Note: There have been public discussions/plans about further tax changes from 2026; always verify the applicable rate at the time of distribution.
  

Personal Income Tax (PIT) - individual level

• Estonian tax residents pay Estonian PIT on taxable income; from 2025 the rate is 22% (flat rate).

• If you are not an Estonian tax resident, Estonia generally taxes you only on Estonian-source income under domestic rules and tax treaties (details depend on income type and treaty).
  

VAT (Value Added Tax)

• Standard VAT rate is 24% from 1 July 2025 (previously 22%).

• VAT registration threshold: obligation typically arises when taxable turnover exceeds €40,000 (with timing rules on when you must apply).

• VAT reporting is typically monthly for VAT-registered businesses; your materials summarize common filing timelines (e.g., VAT return due by the 20th).
  

Payroll / Employment taxes (if applicable)

• Social tax is 33% (generally employer-paid), plus other payroll-related contributions depending on the situation.

1. e-Residency is not tax residency e-Residency does not make you an Estonian tax resident and does not grant the right to live in Estonia. It’s a digital identity to access e-services.
   

2. Personal Tax Residency Estonia considers an individual tax resident if they: - Have a permanent place of residence in Estonia, or - Stay in Estonia at least 183 days in 12 consecutive calendar months. If you live outside Estonia, you are usually tax resident elsewhere, and your personal taxes are typically due where you are tax resident.
   

3. Company tax residency (your Estonian entity) An Estonian company is generally tax resident in Estonia because it is incorporated under Estonian law, and Estonia’s corporate tax is mainly triggered when profits are distributed.
   

4. Double taxation considerations - Tax treaties (DTAs) and domestic rules aim to prevent the same income being taxed twice, but the result depends on your country and income type. - Planning implication: even if Estonia taxes dividends at company level, your country of tax residence may still tax the income you receive personally (salary/dividends/fees), often with credit or exemption mechanisms depending on local law and treaties.
   

5. Practical tax planning points (high-level) Common areas to plan with an accountant in your home country: - How you pay yourself (salary vs board fees vs dividends) and the total tax cost in your residence country. - Avoiding accidental “permanent establishment” or local taxable presence abroad if the real business operations happen in another country. - Timing of distributions (because Estonia’s corporate tax is cash-based at distribution time) (disclaimer: cross-border taxes are fact-specific and users should get local advice.)

These concepts are related but not the same:

• Share capital is the registered capital figure in the company’s articles/register (the nominal “capital” of the company).

• Equity is the company’s net assets: typically share capital plus retained earnings (profits kept in the business) minus accumulated losses.
  

Key practical rules for Estonian OÜs:

• Estonia allows very low share capital (as low as €0.01 per shareholder), and the historic €2,500 minimum was abolished.

• While founders can choose the share capital level, equity must be at least half of the registered share capital (example: share capital €2,500 ⇒ equity must be at least €1,250).

• When distributing dividends, you must not exceed distributable/retained earnings shown in the approved annual report.
  

When distributing dividends, it is important to follow and comply with the following requirements:

The company’s fiscal year must be finished and the last annual report must be approved with a resolution digitally signed by the shareholders.

When deciding the amount of the dividends to be distributed (withdrawn), be sure not to exceed retained earnings or undistributed earnings according to the company's Annual Report.

Annual Reporting: once your company’s financial year has ended, you have up to 6 months to file the previous year's annual report. For most companies, whose financial year ends on 31.12, this means the deadline for the annual report submission is 30.06. The Annual Report includes a summary of financial activities, balance sheets, and profit/loss statements, and most e-residents rely on professional accounting services like GroüHub’s to ensure accuracy and compliance with Estonian law.

Remember that you and your company are two separate persons. Your company is a tax resident of Estonia, while you will remain a tax resident of your country of residence. So your company pays corporate taxes in Estonia, and you pay personal taxes in your country of fiscal/tax residence.

This is usually about reducing cross-border tax and compliance risk by ensuring your structure matches reality. Why "substance" matters

Even if your company is incorporated in Estonia, other countries may look at where the real business is run, where value is created, and whether the company has created a taxable presence there.

Two common concepts:

• PE (Permanent Establishment): A PE is generally a fixed place of business or a situation where business is carried out through an authorised representative in a country. If your Estonian company has a PE in another country, that country may tax the profits attributable to that PE. Estonia also has PE concepts in its tax framework.

• CFC (Controlled Foreign Company) rules: Some countries (and Estonia as well) have CFC rules to prevent profit shifting to low-tax entities without real activity. If a company is controlled and lacks real economic activity, some tax systems can attribute profits back to the controlling taxpayer.

What "building substance" can mean in practice (examples)

The right substance depends on the business model, but common elements include:

• Real decision-making and governance: board decisions documented, contracts approved properly, management activities aligned with the company’s registered structure.

• Operational footprint where needed: people, premises, or service capacity that matches what the business actually does (even if partly outsourced).

• Commercial rationale: clear reasons for Estonia beyond “tax”, aligned with customers/partners, talent, EU operations, etc.

Also, banks and counterparties may expect a local connection for certain services, and Estonia’s system requires a legal address/contact person when management is abroad.

Yes! Being self-employed is an alternative way to withdraw money from your company without having to pay taxes to distribute dividends.

There are two ways: assigning yourself a salary as a board member(director) and/or as an employee of your company. In many cases, the salary type for a small business board member is compensation for performing duties as a manager/board member, an employee, or a combination of both.