NB! As of January 1, 2018, changes to the
Income Tax Act have come into effect regarding the taxation of regularly paid dividends by resident legal entities. This includes the taxation of dividends distributed by an Estonian company to a natural person, with a 7% income tax rate at the level of the individual when applying the 14% preferential rate for dividends. Taxation is carried out through withholding tax by the payer. Thus, such dividends are taxed at both the company and the individual recipient levels. In practice, the implementation provisions of the Income Tax Act provide that the 14% income tax rate can be applied as follows:
1) In 2022, to one-third of the profit distributed in 2019, 2020, and 2021, on which a resident company has paid income tax.
2) In 2023, to one-third of the profit distributed in 2020, 2021, and 2022, on which a resident company has paid income tax.
3) In 2024, to one-third of the profit distributed in 2021, 2022, and 2023, on which a resident company has paid income tax.
