Estonian Company Run from China: Tax Rules

Some Chinese entrepreneurs — and some people who live in China — form or buy an Estonian private limited company (OÜ), often as e-residents, and run it from China. That works, but Chinese enterprise income tax does not look only at where a company was founded: an enterprise established under foreign law whose actual management body is in China is a Chinese resident enterprise and is taxed on its income from inside and outside China. China also has rules on controlled foreign companies, both for resident enterprises and for resident individuals. And the Estonia–China tax treaty leaves a company resident in both countries to an agreement between the two tax authorities. This guide sets out these rules with the official texts, and what we do on the Estonian side.

The guide is general information, not tax advice. How your company and you are taxed depends on the facts of your case; ask a Chinese tax adviser before you form or buy the company. We read the Enterprise Income Tax Law (中华人民共和国企业所得税法, as amended on 29 December 2018), its Implementing Regulations (as revised on 6 December 2024) and the Individual Income Tax Law (as amended on 31 August 2018) in the policy and regulations database of the State Taxation Administration, and the Estonia–China tax treaty with its protocol in Riigi Teataja, on 24 October 2026; the English wording of the Chinese texts below is our translation.

In Estonia: an Estonian company is Estonian

A company established under Estonian law is resident in Estonia for tax purposes (Income Tax Act § 6). Its profit is taxed when it is distributed, not while it stays in the company — the guide how Estonia taxes company profit explains the rule. The company keeps its Estonian duties wherever its owners live: accounts, an annual report to the commercial register and, if its address is abroad, a contact person in Estonia.

In China: the company side

Actual management body in China. A resident enterprise is an enterprise established in China under the law, or established under the law of a foreign country (region) whose actual management body is in China; a resident enterprise pays enterprise income tax on its income from inside and outside China (Enterprise Income Tax Law, Articles 2 and 3).
What the actual management body is. It is the body that exercises substantive, overall management and control over the enterprise's production and business, personnel, accounts and property (Implementing Regulations, Article 4).
Non-residents. A non-resident enterprise with an establishment or place in China pays tax on the income of that establishment from inside China and on income from outside China that is actually connected with it (Enterprise Income Tax Law, Article 3); an establishment includes a management office, a business office and an office (Implementing Regulations, Article 5).
Rate. The enterprise income tax rate is 25% (Enterprise Income Tax Law, Article 4).

An Estonian OÜ is established under Estonian law. If you live in China and the company is in fact managed and controlled there, China can treat it as a Chinese resident enterprise. Your Chinese tax adviser answers that with the facts of your case.

In China: the owner side

Controlled by a Chinese company. When an enterprise in a country (region) whose actual tax burden is clearly lower than the 25% rate is controlled by resident enterprises, or by resident enterprises together with Chinese residents, and does not distribute or reduces the distribution of its profit without a reasonable business need, the part of that profit that belongs to the resident enterprise is included in its income for the year (Enterprise Income Tax Law, Article 45).
Control and low tax. Control includes a resident enterprise or a Chinese resident each holding directly or indirectly at least 10% of the voting shares of the foreign enterprise and together at least 50% of its shares, or substantive control through shares, funds, business or purchases and sales; a tax burden is clearly lower when it is below 50% of the 25% rate (Implementing Regulations, Articles 116 to 118).
Controlled by a Chinese individual. The tax authorities may also adjust the tax of a resident individual when an enterprise in a country (region) with a clearly low actual tax burden, controlled by resident individuals or by resident individuals together with resident enterprises, does not distribute or reduces the distribution of profit belonging to the individual without a reasonable business need (Individual Income Tax Law, Article 8, first paragraph, item 2).
Who is a resident individual. A person with a domicile in China, or without one who stays in China for 183 days or more in a tax year, is a resident individual and is taxed on income from inside and outside China (Individual Income Tax Law, Article 1).

An Estonian company pays its corporate income tax only when it distributes profit, so in a year in which it keeps its profit its burden can be low. Whether these rules reach your company depends on who holds it, on its profit and on why it is kept; your Chinese tax adviser answers that with your figures.

What the Estonia–China tax treaty says

Who is a resident. A resident of a contracting state is a person liable to tax there by reason of domicile, residence, place of incorporation, place of effective management or another similar criterion (agreement signed in Beijing on 12 May 1998, RT II 1998, 52, 119, article 4(1) as replaced by the protocol signed in Tallinn on 9 December 2014, RT II, 05.11.2015, 4).
Resident in both countries. If a person other than an individual is resident in both states, the competent authorities endeavour to settle the question by mutual agreement and determine how the treaty applies to it (article 4(3)). The treaty does not decide it by itself.
Permanent establishment. A permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on; it includes especially a place of management, a branch and an office (article 5(1) and (2)). The profit attributable to it may be taxed in the state where it is (article 7(1)).
Directors' fees. Fees a Chinese resident receives as a member of the board of directors or a similar organ of an Estonian company may be taxed in Estonia (article 16) — see board member fee or dividend from abroad.
Dividends. Dividends paid by an Estonian company to a Chinese resident may be taxed in China; if Estonia also taxes them at source, the treaty limits that tax to 5 per cent of the gross amount for a company (other than a partnership) holding directly at least 25 per cent of the capital, and 10 per cent in all other cases (article 10(1) and (2)).

So the treaty does not settle a double residence by itself: a company actually managed from China may need an agreement between the two tax administrations. The multilateral convention on tax treaty measures (MLI) can change the rules of tax treaties; how it applies to your company is a question for your Chinese tax adviser — we do not give that ruling.

What to decide before you form or buy the company

Where the company is actually managed and controlled. That is the fact the Chinese residence rule looks at.
Who holds it. Holding through a Chinese company brings in the rule of Article 45; holding it yourself as a resident individual brings in Article 8 of the Individual Income Tax Law.
Where the work is done. An office or other fixed place of business in China can be a permanent establishment.

What we do on the Estonian side

online formation for an e-resident — €950 Registered address and contact person service for one year are included., or formation by power of attorney — €1,250;
a ready-made company bought remotely — €1,200 Registered address and contact person service for one year are included.;
accounting — from €150 / month and the annual report — from €450;
the registered address and contact person after the first 12 months — €350 / year.

Our accounting covers the Estonian company's Estonian obligations. Chinese tax returns and Chinese tax advice are not included. Owners in other countries: Estonian company run from abroad compares the rules side by side.

Prices exclude VAT. All communication takes place by email.

Ready to start? A new Estonian company — online for e-residents or by power of attorney; Chinese tax advice is not included. Order.

Official sources

The laws this article names, by the name of their official text, as read on 9 October 2026. For the Estonian acts we read the English translation in Riigi Teataja; the legally binding text is the Estonian one.

Income Tax Act — Riigi Teataja, English translation

Sources are named in the text, without links. To see which of our services your company needs, open the Business Navigator.

Frequently asked questions

Is my Estonian company taxed in China if I run it from China?

It can be. China counts as a resident enterprise an enterprise established under foreign law whose actual management body is in China, and a resident enterprise is taxed on its income from inside and outside China (Enterprise Income Tax Law, Articles 2 and 3). In Estonia the company stays resident because it was established under Estonian law (Income Tax Act § 6). Under the Estonia–China tax treaty the competent authorities try to settle such a double residence by mutual agreement (article 4(3)). China's controlled foreign company rules can reach a low-taxed company that keeps its profit without a reasonable business need, when Chinese resident enterprises or resident individuals control it (Enterprise Income Tax Law, Article 45; Individual Income Tax Law, Article 8). Ask a Chinese tax adviser before you form or buy the company; we handle the Estonian side.

Estonian company run from China: what is taxed where