Key facts
| Item | Estonia | Latvia |
|---|---|---|
| Retained or reinvested profit | 0% | 0% |
| Distributed profit | 22% of the gross (≈28.2% of net) | 20% of the gross (≈25% of net) |
| Further tax at the shareholder | None | None |
| Dividend withholding for non-residents | 0% | 0% (20% to blacklisted jurisdictions) |
| Optional regime from 2026 | — | 15% CIT + 6% PIT on dividends |
What the deferral is worth
The regime is a compounding machine. A company earning €100,000 a year and reinvesting everything deploys the full €100,000 each year; a Lithuanian competitor at the standard 17% rate deploys €83,000. Over years of reinvestment the gap compounds — which is why the structure suits businesses that grow from retained earnings: product companies, asset builders, anything pre-exit. Estonia adds practical appeal: an OÜ can be formed and run entirely online through e-Residency.[3][6]
The deferral is not a rate cut. At distribution Estonia takes 22% and Latvia 20%. Against Lithuania’s 20.95% total for a small company (7% corporate + 15% dividend) the difference is small; against Lithuania’s two-year 0% start-up relief it can even be negative. The value is entirely in the timing: tax-free compounding until the year you choose to pay out.[1][4][6]
Latvia’s 2026 twist
From 2026 Latvia lets companies owned by individuals opt into an alternative: 15% corporate tax on distributable profit plus 6% personal income tax withheld on the dividend — roughly 20% combined, paid earlier but at a structure closer to a classical system. The default 0/20 regime remains.[4][5]
The catch
Everything that sneaks value out of the company is taxed like a distribution: fringe benefits, gifts, non-business costs. Directors’ fees paid by an Estonian company are taxable in Estonia regardless of where the director lives. And the big one: running an Estonian or Latvian company from another country can make it tax-resident there under place-of-effective-management rules, which deletes the whole regime. e-Residency is a login, not a tax residence.[1][2]
Häufig gestellte Fragen
Can profit stay untaxed in an Estonian company forever?
Yes — there is no deadline and no deemed distribution for ordinary retained profit. Tax arises only when profit is distributed or leaks out as fringe benefits or non-business expenses.
Which is cheaper at distribution — Estonia or Lithuania?
For a small company, Lithuania: 7% corporate tax plus 15% dividend tax is 20.95% in total, marginally below Estonia’s 22%. Estonia wins on everything retained; Lithuania wins slightly on everything paid out.
Does e-Residency make me or my company Estonian for tax purposes?
No. It is a digital identity for signing and filing. A company managed day-to-day from another country risks being tax-resident in that country, whatever its register says.
Grenzüberschreitende steuerliche Folgen hängen von der steuerlichen Ansässigkeit, der Hinzurechnungsbesteuerung (CFC-Regeln) und der tatsächlichen wirtschaftlichen Substanz ab — eine reine Papierstruktur reicht nicht aus. Siehe den untenstehenden Haftungsausschluss.
Quellen
Im gesamten Artikel zitierte nummerierte Verweise. Gesetze verlinken auf konsolidierte Texte im amtlichen Register.