Estonian accounting for German companies

Who does Estonian accounting really help?

We work for German companies that really do business in Estonia, rather than using it only as a structure. That is usually the case when:

• your German group has a subsidiary in Estonia with its own staff, premises or customers,
• the company is registered for VAT in Estonia and has to file every month,
• management on the ground actually makes decisions in Estonia,
• you employ people in Estonia and need payroll under Estonian rules.

In those cases you need books kept under Estonian law, Estonian filings on Estonian deadlines, and someone who knows both countries. That is our work.

Who does it not help?

The position is different if you live in Germany, run the company from Germany and hope an Estonian OÜ (a private limited company) will lower your German tax. As a rule it will not. It is better to know this before you set up a company than after.

The German side in five points

We say nothing about German law beyond these five points. For more, see our article on the German subsidiary tax position.

• The German rules on controlled foreign companies (CFC rules, Hinzurechnungsbesteuerung) sit in sections 7 to 14 of the AStG, the German Foreign Tax Act. In plain terms, they can tax a German owner on certain profits of a low-taxed foreign company. They were recast by the ATAD-Umsetzungsgesetz, the law that brought the EU Anti-Tax Avoidance Directive (ATAD) into German law.
• The low-tax threshold in section 8(5) AStG was cut from 25% to 15% by the Mindestbesteuerungsrichtlinie-Umsetzungsgesetz, the law implementing the EU minimum tax directive.
• Section 8(1) lists nine categories of active income, the Aktivkatalog. Income outside it is Zwischeneinkünfte (intermediate income) and can be added back.
• Estonia defers tax on retained profit (0%), and that deferral is itself what trips the low-tax test. So the feature that attracts people is the one that creates the risk.
• A company whose place of management (Geschäftsleitung) is in Germany is German tax resident regardless of where it is registered.

What we do not answer

Everything beyond that is an open question for your Steuerberater. We raise these questions, but we do not answer them:

• Does the income of your Estonian company fall within the Aktivkatalog, or does it produce Zwischeneinkünfte?
• Where is the Geschäftsleitung in fact, and how would you evidence it?
• How is a distribution from Estonia treated at your German company, or in your own hands?
• Can your activity in Germany create a Betriebsstätte (a permanent establishment, meaning a taxable base in Germany)?
• How should intra-group services between Germany and Estonia be treated for tax?

We do not give German tax advice. If one of these questions argues against an Estonian company, we will point it out.

How can you tell whether a conversation is worthwhile?

There are four simple tests. If you can answer yes to them, you probably have a real Estonian operation. The accounting there is then a duty that someone has to do properly:

1. Does the company have employees who work in Estonia?
2. Are the company's decisions in fact taken in Estonia?
3. Does it have Estonian customers, suppliers or an Estonian VAT registration?
4. Would it exist regardless of whether it changes your German tax bill?

If you are asking only because of the tax rate, we start with two questions of our own. Where would the company be managed, and what does your Steuerberater say? If the answer is unfavourable, we will advise against setting it up.

The Estonian numbers worth knowing

These are the headline Estonian figures that you will see in your planning and group reporting:

• Corporate income tax: 0% on retained and reinvested profit, 22% on distribution, levied as 22/78 of the net distribution. In plain terms, for every 78 EUR paid out, the company pays 22 EUR in tax.
• VAT: 24% since 1 July 2025, with a registration threshold of 40,000 EUR. The monthly VAT return (KMD) is due by the 20th of the following month.
• Annual report: by 30 June.
• Payroll: 33% social tax, unemployment insurance 1.6% for the employee and 0.8% for the employer.

How we work with your Steuerberater

We speak to your Steuerberater directly once you authorise it. Together we agree the chart of accounts (the list of accounts the books use), the reporting format and the dates. The Estonian figures then reach your accounts and the group consolidation without rework. We pass German tax questions on and do not answer them ourselves.

What we do on the Estonian side

We do the monthly bookkeeping, file the VAT returns, run payroll and prepare and file the annual report. The two pages below cover the subsidiary itself and the practical running of the books.