Income earned by non-residents in the form of dividends in Estonia is usually not subject to taxation. However, there are certain exceptions, especially regarding dividend payments made before the new rules came into force.
Changes from 2025
Starting in 2025, dividends paid to non-residents will no longer be subject to income tax in Estonia. This important change was introduced to encourage foreign investment and simplify the country’s tax system.
Exceptional cases of taxation
However, there are a few exceptions:
- Dividends received before 2024. If a non-resident individual has received dividends from an Estonian resident business association up to and including 2024, such income may be taxed in accordance with the previously applicable rules. These dividends are considered taxable at the rate of 14/86.
- Participation in investment funds. If a non-resident receives dividends through an equity interest in a contractual investment fund or other set of assets, where more than half of the assets are immovable objects or buildings located in Estonia, and the non-resident has at least a 10% stake in such a fund, these dividends may also be subject to taxation.
In order to properly declare the dividends received by non-residents, payers must file a declaration in the form of INF1. Non-residents are required to obtain a non-resident code from the Tax and Customs Department if there is no such code or they do not have an Estonian personal code.
As for tax rates
The interest earned by a non-resident is usually tax-free. The exception is situations where the amount of interest significantly exceeds the market rate set at the time of origination of debt obligations. In such cases, the tax rate may be 20% (or 22% from 2025). However, tax agreements with some countries (USA, Greece and Vietnam) may reduce this rate to 10%.
Summarizing
The Estonian tax system has undergone significant changes in terms of taxation of dividends and interest income of non-residents. It is important to take into account all exceptions and conditions in order to avoid mistakes when filing tax returns and complying with tax laws.