In June 2025, the Estonian Parliament (Riigikogu) adopted a legislative package adjusting certain tax rules. But for international founders, investors, and e-residents, the most important takeaway is what didn’t happen:
Security Tax Repealed — Before It Ever Took Effect
The so-called Security Tax (Julgeolekumaks) – introduced in 2023 as a planned additional levy – was formally abolished before it ever became effective. It was never applied in practice.
This reinforces Estonia’s reputation for predictable, stable policymaking – an essential trait for those choosing a jurisdiction for long-term company structuring.
VAT and Corporate Income Tax Adjustments
Estonia will implement:
– A higher VAT rate on goods and services,
– A modest increase in the corporate income tax on distributed profits.
But the core of Estonia’s corporate tax model remains unchanged, and that’s what really matters:
0% Tax on Reinvested Profits – Still in Place
Estonian companies pay no corporate tax on retained or reinvested earnings.
Only when profits are distributed as dividends does tax become payable (at the corporate level). This system is:
– Growth-friendly for startups and scale-ups,
– Investor-friendly for holding companies and M&A planning,
– Cash-efficient for long-term builders and exit-oriented founders.
Take a server hosting business launched in Estonia in 2024 with a €10 million investment. Over the next 5–7 years, the company reinvests all profits into infrastructure and expansion. Result: zero corporate tax throughout the growth phase – with taxation possibly only applied upon shareholder exit or profit distribution.
Ideal for Investment and Portfolio Management Structures
Estonia’s corporate tax regime also works exceptionally well for investment companies, portfolio holding structures, and international wealth vehicles.
Here’s why:
– Participation Exemption: Foreign dividends received by an Estonian company are exempt from Estonian tax if the company holds at least 10% of the foreign subsidiary.
– Tax Credit Relief: If the ownership is less than 10%, Estonia applies the foreign tax credit method, meaning foreign withholding tax is credited against Estonian tax.
Either way, Estonia offers a tax-efficient platform for managing international assets and holding structures, with minimal leakage and maximum reinvestment potential.
Why Global Entrepreneurs Choose Estonia
Whether you’re an e-resident building a borderless business, a foreign investor managing portfolios, or an entrepreneur preparing for a future exit, Estonia offers:
– Zero tax on reinvested profits
– Transparent EU-compliant legal framework
– Participation exemption for foreign dividends
– Full digital company management and low admin burden
Ready to Build or Restructure in Estonia?
CONTACT US NOW to ensure your Estonian structure is future-proof, tax-efficient, and fully compliant.
Whether you’re launching, scaling, or holding – Estonia fits the bill.
Team InCorpora
