In short: a resident Estonian company pays no income tax on its profit while the profit is kept or reinvested in the company. Income tax is paid when the profit is distributed, for example as dividends. The rate is 22/78 of the net amount paid out and has applied since 2025. This page is general information, not tax advice.
What "undistributed profit" means
Undistributed profit is profit that the company has earned and has not paid out to its shareholders. It stays in the company: on the bank account, in equipment, in stock, or in the next project.
The Estonian Tax and Customs Board puts it this way on its page "Income and social taxes": "If the company does not distribute profit but invests it in the company, there is no tax liability."
The profit is not exempt for good. The tax is linked to the moment of distribution, not to the year in which the profit was earned.
When tax is paid
According to the same page, the tax liabilities of a company "arise at the distribution of profit (at dividend payment)". The Tax and Customs Board lists the payments on which a company pays income tax:
- distributed profit (dividends);
- fringe benefits;
- gifts and donations;
- costs of entertaining guests;
- payments from the equity capital.
This page does not go into the conditions of each item.
The rate
The Tax and Customs Board states that all the payments listed above are taxed at the same rate of 22/78 from 2025. On its page "Taxation of dividends" it adds that, starting from 2025, dividends are taxed only at the company level, and that the resident company pays the tax on the distribution of profit or dividends (basis: subsection 1 of § 50 and subsections 1 and 1¹ of § 4 of the Income Tax Act).
The fraction is applied to the net amount paid out. In plain terms: for every 78 that the company pays out as a net dividend, it pays 22 as income tax.
Two earlier rules no longer apply from 2025, according to the same page:
- the tax relief for regularly paid dividends, with its lower income tax rate of 14/86;
- the 7% rate of income tax withheld on such dividends paid to natural persons.
The Tax and Customs Board's news page on tax changes in 2026 also states that a 2% security tax on company profit was not introduced.
What it means for a company that reinvests
A company that keeps its profit still has the ordinary duties of an Estonian company. The way profit is taxed does not remove them.
- Accounting continues. The company keeps its books throughout the year, whether or not it plans to pay a dividend. See monthly accounting.
- An annual report is filed every year. The profit is calculated for each financial year and shown in the report, even though no income tax is paid on it until it is distributed. See annual report.
- The decision to distribute is the moment tax becomes due. When the shareholders decide to pay out profit, the company pays income tax on that distribution at the rate described above.
What accounting and an annual report include is explained in the guide accounting for an Estonian OÜ; the services are listed under accounting and closure.
Corporate income tax in Estonia and in other countries
The table below this article lists, for each country, the principle of taxation, whether undistributed profit is taxed, the rate, and the official source with the date on which it was checked.
| Country | Principle | Is undistributed profit taxed? | Rate | Official source | Checked |
|---|---|---|---|---|---|
| Estonia | Profit is taxed when it is distributed. | No | 22/78 of the net amount distributed (from 2025) | Estonian Tax and Customs Board (Maksu- ja Tolliamet), page "Income and social taxes"; see also its page "Taxation of dividends" (last updated 17.10.2025) | |
| Latvia | Profit is taxed when it is distributed. | No | 20% of distributed profit | State Revenue Service (Valsts ieņēmumu dienests), page "Corporate income tax" (the page is dated 23.04.2025) | |
| Lithuania | Profit is taxed for each tax period as it is earned. | Yes | 17%; for small companies (on average up to 10 employees and income up to EUR 300,000) 0% in the first two tax periods and 7% afterwards | Seimas of the Republic of Lithuania, register of legal acts: Law on Corporate Income Tax (Pelno mokesčio įstatymas) No IX-675, Article 5, consolidated version in force from 19 May 2026 (the page is dated 2026-05-19) | |
| Finland | Profit is taxed for each tax year as it is earned. | Yes | 20% | Finnish Tax Administration (Verohallinto), page "Osakeyhtiön ja osuuskunnan tuloverotus" (the page is dated 1.1.2026) | |
| Germany | Profit is taxed for each tax year as it is earned. | Yes | 15% corporate income tax, plus a solidarity surcharge of 5.5% of that tax, plus trade tax at a rate set by each municipality | Federal law: Körperschaftsteuergesetz (KStG) § 23; Solidaritätszuschlaggesetz 1995 § 4; Gewerbesteuergesetz § 16 (official law portal gesetze-im-internet.de) | |
| Netherlands | Profit is taxed for each tax year as it is earned. | Yes | 19% up to EUR 200,000 of taxable profit, 25.8% above it | Wet op de vennootschapsbelasting 1969, Artikel 22 (official law portal wetten.overheid.nl, version in force from 01-01-2026) (the page is dated 01-01-2026) | |
| Poland | Profit is taxed for each tax year as it is earned; a company may instead choose a regime in which tax is paid when profit is distributed. | Yes | 19%; 9% for small taxpayers and new companies within the revenue limits stated on the page | Ministry of Finance and National Revenue Administration of Poland, tax portal podatki.gov.pl, page “CIT klasyczny – Stawki i limity” (the page is dated 24.06.2026) | |
| Ireland | Profit is taxed for each accounting period as it is earned. | Yes | 12.5% for trading income; 25% for income from an excepted trade and for non-trading income | Office of the Revenue Commissioners (Revenue), page “Corporation Tax (CT) — Basis of charge” (the page is dated 25 September 2025) | |
| Cyprus | Profit is taxed for each tax year as it is earned. | Yes | 15% from 1 January 2026 | Tax Department, Ministry of Finance of the Republic of Cyprus, presentation “Φορολογική Μεταρρύθμιση 2026 – Φόρος Εισοδήματος” (Tax Reform 2026 – Income Tax) (the page is dated March 2026) | |
| Malta | Profit is taxed for each year as it is earned. | Yes | 35% | Government of Malta, legislation.mt: Income Tax Act, Chapter 123, Article 56(6), text in force on 10 March 2026 (the page is dated 2026-03-10) | |
| United Kingdom | Profit is taxed for each accounting period as it is earned. | Yes | 25% main rate; 19% small profits rate for profits of GBP 50,000 or less | GOV.UK (HM Revenue & Customs), page "Corporation Tax rates and allowances", section "Rates" |
Rates are given as the official source states them; where a country has several taxes on profit, they are listed and not added up. A rate changes when its country changes it: each row is then read again and its date is renewed.
The table compares the rule on company profit only. Formation rules are compared in separate guides: Estonian company or Lithuanian company and Estonian company or UK Ltd.
Limits of this page
- This page is general information and not tax advice. In Estonia the tax on company profit becomes due when the profit is distributed, and what that means for a particular company depends on its facts.
- Binding answers come from the tax authority or from a tax adviser, not from this page.
- LexorCorp Global does not provide tax advice.
- The page uses only what the official sources named below state, as read on 10 October 2026. The rules can change.
What we do provide: company formation, ready-made companies, and accounting and annual reports. The Business Navigator helps to find the service that fits your situation.
Sources are named in the text, without links. To see which of our services your company needs, open the Business Navigator.
Frequently asked questions
Does an Estonian company pay income tax on profit it does not distribute?
No income tax is paid on the profit while it is kept or invested in the company. The Tax and Customs Board states that in this case there is no tax liability. The tax is paid when the profit is distributed.
What is the rate when profit is distributed?
The rate is 22/78 of the net amount distributed, in force from 2025. For every 78 paid out as a net dividend, the company pays 22 as income tax.
Does the company still have to keep accounts and file an annual report?
Yes. The company keeps accounting and files an annual report every year. The profit is calculated each year, even though income tax on it is paid only at distribution.
Is this tax advice?
No. This page is general information. LexorCorp Global does not provide tax advice; a tax adviser or the tax authority can give an answer for a specific case.
Sources
- Estonian Tax and Customs Board, page "Income and social taxes", read on 10 October 2026.
- Estonian Tax and Customs Board, page "Taxation of dividends", last updated 17.10.2025 according to the page, read on 10 October 2026.
- Estonian Tax and Customs Board, news page on tax changes in 2026 ("Maksumuudatused 2026. aastal"), read on 10 October 2026.
- The official sources for the other countries are named in the table, each with the date on which it was checked.
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