# Tax myths Estonian company owners still believe, checked against the law

Fifteen beliefs about Estonian company tax that are wrong or out of date in 2026, from depreciation and electric cars to interim dividends and the 24 percent rate, each with the fact and the law, plus the old limits that still circulate.

Law as of 30 Sept 2026. General information, not advice for your situation.

Estonian company tax is simple compared to most of Europe, which is exactly why so many half-truths survive. A rule changes, an old article keeps ranking, a figure from five years ago gets repeated in a forum as if it were current.

Here are fifteen beliefs we still meet among owners of Estonian companies. Each one comes with the fact as of 2026 and the law that settles it.

**In short**

- A company cost with no business link, or with no proper source document, is taxed like a dividend. A private benefit costs more than a dividend. [More](https://oscaraccountant.com/en/guides/tax-myths-company-owners#myth-business-expense)
- There is no tax depreciation. An electric company car still creates a fringe benefit, and paying for private trips does not remove it. [More](https://oscaraccountant.com/en/guides/tax-myths-company-owners#myth-depreciation)
- A staff-only dinner is a fringe benefit, not representation. A trip inside Estonia has no tax-free per diem. [More](https://oscaraccountant.com/en/guides/tax-myths-company-owners#myth-team-dinner)
- An OÜ may not lend to a shareholder who holds more than 5 percent, or to a board member. [More](https://oscaraccountant.com/en/guides/tax-myths-company-owners#myth-loan-to-owner)
- There is no 2 percent security tax, no 24 percent income tax, no 14 percent rate on regular dividends and no reduced rate for young companies. [More](https://oscaraccountant.com/en/guides/tax-myths-company-owners#myth-security-tax)
- An OÜ cannot pay interim dividends, and dividends no longer reduce your basic exemption. [More](https://oscaraccountant.com/en/guides/tax-myths-company-owners#myth-interim-dividends)

## Myths about what the company may pay

### Myth: everything the company pays is a tax-free business expense

The company pays no tax on profit it keeps, so it's easy to think that anything paid through the company is free. It isn't. A cost that has no link to the business, or that has no proper source document, is taxed as if the money had been paid out as a dividend. A cost that benefits you or your staff personally is a fringe benefit, which is taxed even more heavily.

**The law.** A non-business cost, including a payment with no source document that meets the accounting rules, is taxed at 22/78 ([Income Tax Act § 51(1) and (2)](https://www.riigiteataja.ee/en/akt/508052026001#para51)). A fringe benefit costs 22/78 income tax plus 33 percent social tax on the value and that tax, about 70.5 percent on top of the value ([Income Tax Act § 48](https://www.riigiteataja.ee/en/akt/508052026001#para48); [Social Tax Act § 2(1)](https://www.riigiteataja.ee/en/akt/525052026001#para2), clause 7).

### Myth: buying assets, or depreciation, lowers my tax

In many countries, a company buys equipment before the end of the year to lower its taxable profit. In Estonia, that does nothing, because a company doesn't pay tax on profit until it distributes it. There's no yearly tax bill for depreciation to reduce. Buying an asset only keeps the money in the company, which you could do just as well by leaving it in the bank.

**The law.** The company pays income tax when it distributes profit ([Income Tax Act § 50(1)](https://www.riigiteataja.ee/en/akt/508052026001#para50)). An asset bought for a purpose other than the business is itself taxed, as a non-business payment ([Income Tax Act § 52(2)](https://www.riigiteataja.ee/en/akt/508052026001#para52), clause 1).

### Myth: an electric car has no fringe benefit

The fringe benefit on a company car isn't based on fuel or emissions. If you can use the car privately, the company pays tax on a fixed amount per kilowatt of engine power every month. An electric car is no exception.

**The law.** The value is 1.96 euros per kW of the power in the traffic register each month, or 1.47 euros for a car older than five years ([Income Tax Act § 48(8)](https://www.riigiteataja.ee/en/akt/508052026001#para48)). The provision has no exception for electric cars. More in [cars and private use](https://oscaraccountant.com/en/guides/cars-private-use#which-power-figure-applies-to-an-electric-or-hybrid-car).

### Myth: if I pay the company for my private trips, there is no car benefit

The benefit comes from the possibility of private use, not from the trips you actually make. Paying the company per km doesn't reduce it. The way out is to keep the car for work only, with the marking in the traffic register, and really keep it that way.

**The law.** The benefit arises when the company allows the car to be used for purposes other than work ([Income Tax Act § 48(8)](https://www.riigiteataja.ee/en/akt/508052026001#para48)). A car kept for work only is marked so in the traffic register ([§ 48(8²)](https://www.riigiteataja.ee/en/akt/508052026001#para48)). More in [cars and private use](https://oscaraccountant.com/en/guides/cars-private-use#does-paying-for-private-trips-remove-the-benefit).

### Myth: a dinner with my team is representation

Representation means having guests and business partners. A dinner for your own team, with no guests, is a benefit to your staff and is taxed as a fringe benefit. When guests come to a staff event, the Tax and Customs Board splits the cost by the number of people: the staff share is a fringe benefit, and the guest share is representation.

**The law.** The tax-free limit for receptions covers guests and business partners, up to 50 euros a month plus 2 percent of the payroll that carries social tax ([Income Tax Act § 49(4)](https://www.riigiteataja.ee/en/akt/508052026001#para49)). Benefits to staff fall under [§ 48](https://www.riigiteataja.ee/en/akt/508052026001#para48). The split by headcount is from the [Tax and Customs Board handbook on reception costs](https://emta.ee/node/330/chapter/15207/pdf).

### Myth: a business trip inside Estonia has a tax-free per diem

Only a trip abroad has a tax-free per diem. On a trip inside Estonia the company can still pay the travel and hotel against documents, but a daily allowance on top of that is taxed as pay.

**The law.** The Income Tax Act exempts the per diem of a trip abroad only ([Income Tax Act § 13(3)](https://www.riigiteataja.ee/en/akt/508052026001#para13), clause 1). See [tax-free payments to a board member](https://oscaraccountant.com/en/guides/tax-free-payments-board-member#per-diem-and-trip-costs).

### Myth: a company loan to me is not a dividend

This one has two problems, and the first one isn't even about tax. Company law forbids an OÜ to lend to a shareholder who holds more than 5 percent, or to a member of its board, and such a loan is void. For tax, a loan to a shareholder can be taxed as a hidden profit distribution when the facts point to one: it's rolled over, it has no security, or it carries no interest.

**The law.** The loan ban and its effect are in [Commercial Code § 159(1) and (4)](https://www.riigiteataja.ee/en/akt/527022024004#para159). The tax on a loan that is in substance a distribution is in [Income Tax Act § 50²(1)](https://www.riigiteataja.ee/en/akt/508052026001#para50b2).

### Myth: rent for my home office room is taxed at 17.6 percent

The 17.6 percent is because of a 20 percent deduction for the rent of a dwelling. A room you let to your company as an office is business premises, not a dwelling, so the deduction does not apply and the rent is taxed at the full 22 percent.

**The law.** The 20 percent deduction applies to rent under a lease of a dwelling ([Income Tax Act § 39¹](https://www.riigiteataja.ee/en/akt/508052026001#para39b1)). A room used in business or professional activity is business premises ([Law of Obligations Act § 272(1)](https://www.riigiteataja.ee/en/akt/510092026001#para272)). More in [salary or dividend in 2026](https://oscaraccountant.com/en/guides/salary-or-dividend-2026#insured-another-way).

### Myth: the per diem is 75 euros for the first 15 days of each month

The 75 euro rate is for the first 15 days of each trip, not each month. There's also a cap: at most 15 days in a calendar month count at 75 euros. Every further day of the trip counts at 40 euros.

**The law.** [Income Tax Act § 13(3)](https://www.riigiteataja.ee/en/akt/508052026001#para13), clause 1. A trip from 28.03 to 14.04, with no other trip in March, gets 15 x 75 + 3 x 40 = 1,245 euros tax-free.

## Myths about rates and law changes

### Myth: there is a 2 percent tax on board fees from 2026

Some still write that a 2 percent tax applies to board fees from 2026, sometimes only for companies of e-residents. It doesn't exist. The Security Tax Act that planned a 2 percent security tax was repealed before it took effect, so no one pays it, on a board fee or on profit.

**The law.** The Security Tax Act was repealed by the act published in Riigi Teataja on 08.07.2025 ([RT I, 08.07.2025, 1](https://www.riigiteataja.ee/akt/108072025001)).

### Myth: income tax rises to 24 percent

A rise to 24 percent was planned, and it was cancelled before it took effect. The rate for a person and for a company's distributions is 22 percent in 2026.

**The law.** [Income Tax Act § 4(1)](https://www.riigiteataja.ee/en/akt/508052026001#para4); the cancelling act of 03.12.2025 ([RT I, 18.12.2025, 3](https://www.riigiteataja.ee/akt/118122025003)).

### Myth: regular dividends are taxed at 14 percent

The lower rate for regular dividends was real, but it ended. Every dividend paid from 01.01.2025 is taxed at 22/78. Articles that still mention the 14 percent rate are just old.

**The law.** The provision on regularly paid dividends is repealed ([Income Tax Act § 50¹](https://www.riigiteataja.ee/en/akt/508052026001#para50b1)); see also the [Tax and Customs Board](https://www.emta.ee/ariklient/maksud-ja-tasumine/tulumaks-ja-sotsiaalmaks/dividendide-ja-omakapitali-valjamaksete). One transitional case remains for profit taxed at 14/86 up to 31.12.2024, explained in [corporate income tax on distributions](https://oscaraccountant.com/en/guides/cit-distribution-tax#what-happened-to-the-reduced-rate-for-regular-dividends).

### Myth: a company pays only 15 percent in its first two profitable years

No such rule. A new company is taxed exactly like an old one: nothing while it keeps its profit, and 22/78 when it distributes.

**The law.** [Income Tax Act § 4(1) and (1¹)](https://www.riigiteataja.ee/en/akt/508052026001#para4) and [§ 50(1)](https://www.riigiteataja.ee/en/akt/508052026001#para50) set one rate, with no reduced rate for young companies.

### Myth: an OÜ can pay interim dividends

An OÜ pays dividends only on the basis of an approved annual report. A monthly "dividend" during the year is not lawful and may have to be paid back. If you need money during the year, a board fee or a salary is the lawful way.

**The law.** [Commercial Code § 157(1)](https://www.riigiteataja.ee/en/akt/527022024004#para157); a payment the shareholder had no right to receive must be returned ([§ 158](https://www.riigiteataja.ee/en/akt/527022024004#para158)). See [paying a dividend](https://oscaraccountant.com/en/guides/dividends-mechanics#interim-dividend).

### Myth: dividend income reduces my basic exemption

That was true until the end of 2025, because the basic exemption used to shrink as income grew. Since 2026 the basic exemption is the same for everyone: 8,400 euros a year, or 700 euros a month, whatever your income. Dividends no longer affect it.

**The law.** [Income Tax Act § 23(1)](https://www.riigiteataja.ee/en/akt/508052026001#para23); [Tax and Customs Board: tax changes 2026](https://www.emta.ee/uudised/maksumuudatused-2026).

## Old limits that still circulate

Some myths are not wrong ideas but old numbers. The limits below changed, yet the old figures still appear in templates, spreadsheets and articles online. If a source quotes a figure from the second column, it's outdated.

| Item                           | Figure you may still see online                                               | The figure in 2026                                                 | Law                                                                                                                                                                     |
| ------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Health and sport               | 100 euros a quarter                                                           | 400 euros a year, no quarterly cap                                 | [Income Tax Act § 48(5⁵)](https://www.riigiteataja.ee/en/akt/508052026001#para48)                                                                                       |
| Compensation for a private car | 0.30 euros a km, at most 335 euros a month; 64 euros a month with no trip log | 0.50 euros a km, at most 550 euros a month; a trip log is required | [Income Tax Act § 13(3)](https://www.riigiteataja.ee/en/akt/508052026001#para13), clause 2; [car compensation regulation](https://www.riigiteataja.ee/akt/102072025018) |
| Per diem abroad                | 50 euros, then 32 euros a day                                                 | 75 euros for the first 15 days of each trip, then 40 euros a day   | [Income Tax Act § 13(3)](https://www.riigiteataja.ee/en/akt/508052026001#para13), clause 1                                                                              |
| Housing for an employee        | 200 euros in Tallinn or Tartu, 100 euros elsewhere                            | 500 euros a month in Tallinn or Tartu, 250 euros elsewhere         | [Income Tax Act § 48(5⁶)](https://www.riigiteataja.ee/en/akt/508052026001#para48)                                                                                       |
| Company car                    | "all car costs are tax-free"                                                  | a fringe benefit per kW each month if private use is possible      | [Income Tax Act § 48(8)](https://www.riigiteataja.ee/en/akt/508052026001#para48)                                                                                        |

## What Oscar does

Oscar keeps the books of your company with the rules as they are today, not as an old article remembers them. When a rate or a limit changes, we change it in Oscar, and an accountant checks the books. If something here surprised you, the other guides go into each topic in more detail.

General information, not advice for your situation. The law as in force on 30.09.2026.

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## Sources

- [Income Tax Act § 4](https://www.riigiteataja.ee/en/akt/508052026001#para4)
- [Income Tax Act § 13](https://www.riigiteataja.ee/en/akt/508052026001#para13)
- [Income Tax Act § 23](https://www.riigiteataja.ee/en/akt/508052026001#para23)
- [Income Tax Act § 39¹](https://www.riigiteataja.ee/en/akt/508052026001#para39b1)
- [Income Tax Act § 48](https://www.riigiteataja.ee/en/akt/508052026001#para48)
- [Income Tax Act § 49](https://www.riigiteataja.ee/en/akt/508052026001#para49)
- [Income Tax Act § 50](https://www.riigiteataja.ee/en/akt/508052026001#para50)
- [Income Tax Act § 50²](https://www.riigiteataja.ee/en/akt/508052026001#para50b2)
- [Income Tax Act § 51](https://www.riigiteataja.ee/en/akt/508052026001#para51)
- [Income Tax Act § 52](https://www.riigiteataja.ee/en/akt/508052026001#para52)
- [Social Tax Act § 2](https://www.riigiteataja.ee/en/akt/525052026001#para2)
- [Commercial Code § 157](https://www.riigiteataja.ee/en/akt/527022024004#para157)
- [Commercial Code § 158](https://www.riigiteataja.ee/en/akt/527022024004#para158)
- [Commercial Code § 159](https://www.riigiteataja.ee/en/akt/527022024004#para159)
- [Law of Obligations Act § 272](https://www.riigiteataja.ee/en/akt/510092026001#para272)
- [Regulation on business trip costs and foreign per diems, § 4](https://www.riigiteataja.ee/akt/102072025020)
- [Regulation on compensation for using a private car for work, §§ 3 to 6](https://www.riigiteataja.ee/akt/102072025018)
- [Act repealing the Security Tax Act (RT I, 08.07.2025, 1)](https://www.riigiteataja.ee/akt/108072025001)
- [Act of 03.12.2025 cancelling the income tax rise (RT I, 18.12.2025, 3)](https://www.riigiteataja.ee/akt/118122025003)
- [Tax and Customs Board: tax changes 2026](https://www.emta.ee/uudised/maksumuudatused-2026)
- [Tax and Customs Board: dividends and equity payouts](https://www.emta.ee/ariklient/maksud-ja-tasumine/tulumaks-ja-sotsiaalmaks/dividendide-ja-omakapitali-valjamaksete)
- [EMTA handbook: reception costs](https://emta.ee/node/330/chapter/15207/pdf)

## Related pages

- [Salary or dividend in 2026: what an Estonian OÜ owner keeps, with the numbers](https://oscaraccountant.com/en/guides/salary-or-dividend-2026): What 1,000 euros of company money gives an Estonian OÜ owner in 2026 as a salary, a board member fee or a dividend, why many owners take an 886 euro board fee plus dividends, and when the Tax and Customs Board may see a dividend as pay.
- [Tax-free payments to a board member of an Estonian OÜ in 2026](https://oscaraccountant.com/en/guides/tax-free-payments-board-member): What an Estonian OÜ can pay its owner as a board member with no income tax and no social tax in 2026: car compensation, per diem and trip costs, health and sport, home office, equipment and training, and what is not tax-free.
- [Fringe benefits, staff perks and business travel in Estonia](https://oscaraccountant.com/en/guides/fringe-benefits-travel): How an Estonian company taxes staff benefits, the 400 euro sports and health allowance, home office costs, and tax-free per diems on business trips.
- [Company cars and private cars: fringe benefit and car compensation in Estonia](https://oscaraccountant.com/en/guides/cars-private-use): How Estonia taxes private use of a company car (per kW a month), and how to pay tax-free compensation for a private car with a trip log.
- [Paying a dividend from an Estonian OÜ: the steps, the limits and the TSD](https://oscaraccountant.com/en/guides/dividends-mechanics): The steps to pay a lawful dividend from an OÜ, how much you may pay, instalments, dividends in kind, and how to declare it on the TSD.
- [Estonian tax rates 2024 to 2026](https://oscaraccountant.com/en/guides/estonian-tax-rates): Every Estonian business tax rate on one page, by year: corporate and personal income tax, basic exemption, social tax, unemployment insurance, pension, VAT.

Reviewed on 10 Nov 2026. Law as of 30 Sept 2026. General information, not advice for your situation.

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