Estonia has been ranked the country with the most competitive tax code in the OECD for the 13th year in a row, Estonian World reports, citing the annual International Tax Competitiveness Index published by the US-based Tax Foundation.
The foundation names four features behind the top score. In its words, First, it has a 22 percent tax rate on corporate income that is only applied to distributed profits.
The second is a flat 22 percent tax on individual income that does not reach personal dividend income. The third is a property tax levied on the value of land alone, not on buildings or capital. The fourth is a territorial system under which profits that domestic companies earn abroad are fully exempt from Estonian tax, with few restrictions.
Other countries near the top score well in particular categories, according to the index. Latvia, which has taken over the Estonian way of taxing companies, is also credited with an efficient system for taxing labour. Switzerland is noted for a corporate rate of 19.5 percent and Lithuania for a rate of 17 percent together with full expensing of investment in machinery, equipment and intangible rights.
France is placed last. The foundation points to the highest top corporate rate in the OECD, 36.1 percent including surtaxes, several separate property levies and a VAT base that covers about 50 percent of final consumption. Countries at the bottom of the index tend to combine high corporate rates with narrow VAT bases and taxes such as digital services, financial transaction and inheritance taxes.
Source: Estonian World, . The text above is our own summary; the words in quotation marks are the source's.
What this means for an Estonian entrepreneur
For an Estonian company the ranking describes the rule that shapes everyday decisions: profit that stays in the company is not taxed, and corporate income tax arises only when profit is distributed. An entrepreneur can therefore reinvest earnings without a tax cost and plan the timing of dividends, while profits earned abroad by the company are exempt under the territorial system the index describes.
A ready-made Estonian company lets you start under this tax system at once, with the registered address and contact person included. Ready-made Estonian company