This page is for foreigners weighing Estonia’s taxes, Americans first: whether you become tax resident, what e-Residency and an Estonian OU company do and do not change, and what an employee and a company owner pay in 2026. For EU residents it closes with how Estonia compares across the bloc.
Taxes in Estonia for foreigners: who counts as resident
Estonia taxes its residents on worldwide income and non-residents only on income from Estonian sources (Estonian Tax and Customs Board). Under section 6(1) of the Income Tax Act you are resident if your place of residence is in Estonia, or if you stay in Estonia at least 183 days over 12 consecutive calendar months. Partial days count, including the days you arrive and leave, and residence runs from the date you arrived.
If another country also treats you as resident, the tax treaty between the two decides, and you prove it with a residence certificate from the other country’s tax authority. A non-resident who works in Estonia pays the same 22% on that pay, but without the basic exemption unless they are resident in another EEA state.
Income tax in Estonia in 2026
Estonia has one rate for all personal income, and the rise to 24% once planned for 2026 was cancelled. These are the 2026 figures, all from the Tax and Customs Board:
| Tax | 2026 | Who pays |
|---|---|---|
| Income tax | 22% flat (also 22% in 2025, 20% in 2024) | You, withheld from pay |
| Basic exemption | EUR 700 a month (EUR 8,400 a year), whatever you earn; EUR 776 at pensionable age | Residents; EEA-resident non-residents on application |
| Social tax | 33% of salary; for most employees, on at least EUR 886 a month | Your employer, on top of your salary |
| Unemployment insurance | 1.6% employee, 0.8% employer | Both |
| Funded pension (II pillar) | 2% by default, 4% or 6% on application | You, if you are in the scheme |
| Tax on company profits | 0% while retained; 22/78 of the net amount paid out | The company, when it distributes |
Source: Estonian Tax and Customs Board, tax rates for 2024 to 2026, read 10 November 2026. The lower 14/86 rate for regular dividends ended on 1 January 2025.
Estonia is simple to file, but not the lowest-tax country for every income. Your income type and where you spend your days decide that.
Rank all 27 for my incomeDoes e-Residency make you an Estonian tax resident?
No. The Tax and Customs Board says plainly that an e-resident is a non-resident, that e-Residency does not exempt you from tax elsewhere, and that your tax residence depends on things like where you live. What changes is the company: an Estonian OU set up by an e-resident is an Estonian resident company and pays Estonian corporate tax. Where you run it from day to day can still give the country you live in a claim on its profits, so the OU does not move your own tax home.
Taxes in Estonia for Americans: the IRS still comes first
US citizens are taxed on worldwide income from all sources and file under the same rules wherever they live (IRS). The US-Estonia income tax convention, signed on 15 January 1998, keeps that right in Article 1(4): the US may tax its citizens as if the convention had not come into effect. Moving to Tallinn therefore adds an Estonian return to your US one rather than replacing it, and credits or exclusions on the US return are what usually stop the same income being taxed twice.
Owning an OU adds US paperwork too: certain US citizens and residents who are officers, directors or shareholders of a foreign company file Form 5471 (IRS). Before you register a company, read our route guide to moving to Estonia from the US for the visa side, and ask a cross-border tax advisor about your case.
Worked example: an employee on EUR 60,000
A resident employee earning EUR 60,000 a year ($67,200), so EUR 5,000 a month, who is not in the funded pension, with 2026 rates:
- Unemployment insurance: EUR 5,000 x 1.6% = EUR 80.
- Income tax: (EUR 5,000 - EUR 80 - EUR 700) x 22% = EUR 928.40. The Tax and Customs Board’s own payroll example also takes the unemployment premium off before the 22%.
- Take-home: EUR 3,991.60 a month ($4,470), 79.8% of gross.
- The employer also pays EUR 1,650 social tax and EUR 40 unemployment insurance, so the job costs EUR 6,690 a month.
In the funded pension, a further EUR 100 (2%) goes to your pension account by default, and take-home falls to about 78% of gross, the figure MoveMap’s take-home model uses for this salary (a MoveMap estimate).
Worked example: a company owner taking dividends
An OU with EUR 60,000 of profit after costs ($67,200) pays nothing while it keeps the money. If it pays the whole profit out as a dividend, the tax is 22/78 of the dividend: EUR 46,800 goes to the owner and EUR 13,200 to the state, which is 22% of the profit, or about 28.2% on top of the dividend.
For an American owner the dividend is also US income, so the US side decides whether the structure actually saves money.
Income tax in Estonia compared with the EU
For EU residents comparing countries, this is how much of a gross salary an employee keeps in Estonia against the middle of the 27, in MoveMap’s take-home model (single person, no children, standard rules, MoveMap estimate):
| Gross a year | Estonia keeps | EU median | Estonia’s rank of 27 |
|---|---|---|---|
| EUR 30,000 | 81% | 77% | 7 |
| EUR 60,000 | 78% | 68% | 2 |
| EUR 120,000 | 77% | 61% | 2 |
The flat rate matters most at higher pay, where progressive countries take more. For all 27 side by side, see the EU take-home pay index, switch profile and income on the income tax in Europe by country hub, or read the EU countries with the lowest taxes. Neighbours compared: Estonia vs Finland and Estonia vs Latvia; for daily life, see living in Tallinn and the Estonia country guide.
What this page cannot settle
Treaty tie-breakers, the US credit or exclusion you should claim, social cover when you take only dividends, and how your home country treats a company you run from there all depend on your facts. A cross-border tax advisor who knows both systems can settle them. Tax is one factor among many: the best countries in Europe to live guide weighs the rest.