Estonia in the tax system

Published:

July 31, 2020

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The conditions for the development of business activities, which dominate in the modern world, make to select flexible and business-oriented tax platforms.

The reason for this is many factors that form on the stability of a particular jurisdiction. According to OECD analytical data, the taxation system of Estonia is the most comfortable among other world systems.

Estonia was awarded the 1st place by the 2015 International Tax Systems Competitiveness Index.

As part of the process of determining the leading taxation system, the Tax Organization examined several indicators in order to calculate the level of competitiveness for each state individually.

Among the main criteria were the collection of compulsory payments of various types, as well as methods of taxation and salaries of individuals, based on internationally accepted rules for collecting taxes for each state.

Estonia, in just a year, managed to become higher in the ranking than the jurisdictions of Switzerland, Sweden, New Zealand and others.

Famous analytic Kyle Pomerleu notes that Estonia has managed to take a leading position thanks to the adoption of a corporate tax rate of 20 %, a mandatory value-added payment of 20 %, and some other taxes, including tax on transactions with funds and real estate tax.

Deserved place in the rating

Estonia deservedly deserved 1st place, because in fact the tax system of this state offers comfortable and most suitable conditions for the development of business activities according to the following four criteria:

corporate tax – 20 %, it is applied exclusively at the time of distribution of the received profit;
income tax – 20%, it does not cover private income from various dividends;
property tax depends on the price of the land plot, and not on how much the capital is or the property itself is valued at;
territorial tax collection system – income from foreign sources is not taxed.

Although Estonia is in the lead, some other countries also offer quite attractive tax conditions. New Zealand, for example, has set the rate for income tax payments not too high, which does not include capital gains tax.

Switzerland offers a low corporate tax rate of 21.1%. In addition, there is a low consumption tax and income tax does not cover capital gains. Sweden has set a 22 % income tax rate and removed the mandatory tax payment for wealth or real estate.

The Netherlands also boasts competitive tax regulations. Moreover, each of the above states are included in the top five of the International Index.

The lowest index is in those countries that set a high corporate tax on income received. Five such states became the last in the index. They also offer quite large taxes on real estate and other property.

Among such countries, for example, there is Poland, but it does not set in the top five of the worst.

The accounting department of the company must compile quarterly, annual financial reports and provide declarations to the tax service. Contact us for more information.

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