Illustrative calculation for €50,000 gross annual income.
Private limited company (OÜ), full distribution
Freelancing through an OÜ: 0% on retained profit, but distributing it to live on is taxed at 22/78 plus a temporary 2% defence tax.
| Dividend distribution tax (22/78) | €11,000 |
| Temporary defence tax (2%) | €1,000 |
| Total tax & contributions | €12,000 |
| Effective rate | 24% |
| Net income | €38,000 |
Assumptions
- Models FULL distribution of annual profit as dividends: the realistic case for someone living off the income; the famous "0% on retained profit" only helps if you reinvest/retain and is therefore NOT shown as an effective rate
- Dividend distribution taxed at 22/78: 22% of the gross distribution pool (≈ 28.21% of the net dividend); the planned 2026 rise to 24% was repealed in Dec 2025
- Temporary 2% defence/security tax on company profit (2026-2028) is included
- The reduced 14% rate on regularly distributed dividends was abolished from 2025
- Alternative not modelled: paying yourself a salary instead of dividends triggers social tax (~33%) plus payroll income tax, so dividends are the usual freelancer route
- Not modelled as tax: a small e-Residency OÜ typically pays ~€200-400/month for a registered agent and accounting
- The entered income is treated as annual distributable profit (revenue net of business expenses); no corporate-level expenses are assumed
- Effective rate is total tax over gross profit
Who it's for
- Estonian OÜ (private limited company), commonly set up via e-Residency
- Owner-manager who distributes profit to live on (not reinvesting it)
- Corporate-level bookkeeping and reporting apply