Dividend taxation in an OÜ 2026 — rate 22/78

When an OÜ (private limited company) distributes profit, the question is: how much tax on dividends? From 2025 Estonia uses a uniform rate of 22/78. The old rates 20/80 and 14/86 no longer apply. Here is 2026 practice.

What is 22/78?

If you want to pay a shareholder a net dividend of €7,800, the company pays income tax of €2,200. Of the profit being distributed, 22% goes to tax and 78% as net cash. Total company cost: €10,000.

From net: income tax = net dividend × (22/78). From gross: net dividend = distributable profit × 0.78.

Retained earnings are not taxed at company level in Estonia. Tax arises when profit is distributed.

Why 14/86 no longer applies

Until 2024, regularly distributed dividends could use the reduced rate 14/86 (plus 7% withholding for individuals). From 1 January 2025 that relief was abolished. All new dividend payouts use 22/78.

Transitional rules may apply if the company still has dividend balances taxed at 14/86 before 2025. Those cases are technical — check with your accountant before paying further.

How to pay dividends

1. Shareholders decide on profit distribution (shareholders' resolution / board proposal per the articles)
2. Confirm equity and distributable profit allow the payout
3. Calculate income tax at 22/78
4. Report the payout on the TSD (income and social tax return) and pay tax by the deadline (generally the 10th of the following month)
5. Transfer the net amount to the shareholder's account

Dividends go on the TSD. Wrong line or late payment brings interest.

Dividend vs salary vs board fee

Dividends carry a lower tax burden than salary (salary + 33% social tax + income tax), but dividends do not give health insurance or pension credit the same way. For an owner's living costs, a mix often works: a sensible board member fee or salary plus dividends when profit allows.

Common mistakes

• Paying a dividend without a resolution and documentation
• Payout when there is no real distributable profit
• Following old 14/86 guidance in 2026
• Forgetting cash flow — tax must be paid even if the account is empty

GPCONSULT OÜ

We calculate the net amount and tax cost, prepare TSD entries and check that equity stays compliant. Before the payout — not after an MTA question.