Tax system of Estonia

Tax system of Estonia consists of national taxes and local taxes. National taxes are income tax, social tax, land tax etc.

According to Estonian Income Tax Act income tax is paid by natural persons and non-resident legal persons who get taxable income. Income tax is imposed on the income of a taxpayer from which deductions allowed by law have been made.

And of course non-resident pays tax only from their income received from Estonian sources.

The standard tax rate for natural persons in 2013 is 21% of the taxable income. The Parliament of Estonia passed a law according to which standard tax rate for natural persons from year 2015 will be 20% of the taxable income.

First of all taxable income is income from work under a labour contract and income from a business carried on in Estonia. It also includes interest income received from Estonia, royalties, income from the lease of real estate located in Estonia, gains from disposal of assets located in Estonia etc.

According to Estonian Income Tax Act § 23, basic exemption which equals to 1728 euros per year is deducted from the income of a resident natural person, what makes 144 euros per month.

Natural person must not pay income tax after receiving inheritance. But if person decide to sell property, which was received from inheritance then in some cases person have to pay income tax, for example when property is not used for personal goals. For example when person receive real estate as inheritance and he or she decide to sell this property and it was not used as temporary or permanent residence then selling this property will be taxed, income tax should be paid.

It is worth noting, that Estonian Income Tax Act doesn’t give definition of personal property. The main aspect describing personal property is its involvement of one"s personal and financial interests.

Amount of deductible housing loan interest, training and study expenses, gifts and donations is limited – in 2012 the limit was 1920 euros but no more than 50% of the taxpayer's income during the same period of taxation.