The Estonian model is not zero tax; it is deferral. For a Romanian-resident owner who distributes the profit, the arithmetic comes out — surprisingly to many — worse than with a Romanian SRL (limited liability company). The Estonian advantage exists only for as long as the money stays inside the company.
A software developer resident in Romania, with clients in Germany and the Netherlands, read that "in Estonia reinvested profit is not taxed". He obtained e-Residency in three weeks, incorporated an Estonian company in a day and began invoicing from there.
Two years later he wanted to take the money out, to buy a flat. Only then did he learn three things: that distribution is taxed in Estonia, that the dividend received is taxed once again in Romania, and that the company he ran single-handedly, from Romania, was — in the reading of Romanian law — an unregistered Romanian company. None of this was hidden. All of it was public. Simply, no one had joined the dots for him. The correct starting point is what remained legal of international structures in 2026.
Estonia does not have "zero corporate tax". It has a tax on distributed profit.
For as long as it stays inside the company, retained and reinvested profit generates no tax.
Calculated as 22/78 of the net amount distributed. Out of gross profit of EUR 100, the company can distribute 78 and owes 22 to the Estonian state.
The 22/78 formula confuses. The mechanics, though, are simple: the tax is 22% of gross profit — or, from the shareholder's perspective, roughly 28.2% of the net amount received. It is not a small rate. It is merely a deferred rate, until distribution.
The 14% rate (14/86) for regular distributions was abolished from 1 January 2025. All distributions are now taxed uniformly, at 22/78. The argument that "if you distribute steadily, you pay less" no longer holds.
In December 2025 the Riigikogu (Estonian parliament) adopted amendments that dropped the planned move to 24/76. The rate remains 22 (22/78) in 2026.
Repealed by the Riigikogu on 19 June 2025, before it took effect. The only increase that survived that package is VAT, raised to 24% from 1 July 2025 and made permanent.
So the picture as at July 2026 is: 0% on reinvested profit, 22% (22/78) on distribution, standard VAT of 24%. The trend is worth noting too: over the past two years Estonia raised the rate from 20% to 22%, abolished its only preferential regime and attempted — unsuccessfully, but attempted — two further increases. This is not a jurisdiction moving towards lighter taxation; it is one defending a model, not a level of tax.
e-Residency is a digital identity issued by the Estonian state that allows electronic signing of documents, online incorporation and administration of an Estonian company, and access to digital public services. It is a useful and, in its way, remarkable administrative tool. It is essential, however, to be precise about what it is not.
It does not change your tax status in any state.
It is not a visa and does not allow you to live in Estonia.
It confers no political rights.
Neither you, nor the company you administer.
The Estonian tax authority states this expressly in its own materials: if an e-resident manages the company from outside Estonia, the Estonian company will probably have a permanent establishment in that other state, and the profit earned through that establishment is taxed there.
CAUTION: This is the central trap — and it comes not from ANAF, the Romanian tax authority, but from the logic of the Estonian system itself. An Estonian company whose management and commercial decisions are taken from Romania falls within art. 7 pt. 37 of the Romanian Tax Code (Codul fiscal): with its place of effective management (locul conducerii efective) in Romania, the company is Romanian tax resident and owes Romanian corporate tax on its worldwide result, with the attendant registration and filing obligations. The Estonian deferral benefit evaporates, because it is not Estonia that decides where the company sits — the facts decide. And the facts, in a structure run by a single person from an office in Romania, are hard to dispute.
If the profit stays in the company for years, funding development, hiring and product, the deferral has real value. If you distribute everything, every year, the deferral is worth nothing.
Where the intra-EU VAT regime works predictably.
A team, decision-making, presence — substance. Not necessarily the founder relocated there, but someone with real authority who actually decides.
With their tax residence changed correctly and documented.
A fifth profile, rarer and more legitimate than assumed: the founder who genuinely has clients, partners, developers or infrastructure in the region. The Estonian company is not a tax device, but the natural vehicle of a business that exists there.
What does not work: a Romanian-resident founder, European clients, an Estonian company managed remotely, with the stated intention of distributing the profit to Romania. In that scenario the structure adds cost and risk without producing any advantage.
The internal test is always the same: if the tax factor were neutral, would you still incorporate in Estonia? If the answer is yes, the structure has a business rationale that withstands any anti-abuse analysis. If the answer is no, you have already identified the problem — however persuasive the incorporation provider's pitch may sound.
Here the uncomfortable point must be made. Since 2025, Estonia no longer withholds tax at source on dividends paid to non-residents. Taxation takes place exclusively at company level, through the 22/78 rate. The consequence for an individual shareholder resident in Romania is direct: the dividend reaches you with no Estonian tax withheld from you — hence nothing to credit in Romania.
Romania taxes the dividend received from abroad at the rate applicable to dividend income, raised to 16% for dividends distributed from 1 January 2026 by Law no. 141/2025. The foreign tax credit under art. 131 of the Tax Code is granted for tax paid abroad by the individual, evidenced by documents issued by the foreign tax authority — not for tax paid by the company.
The prudent position, which I support, is that this credit is not granted: there is no Estonian tax paid by you that you could credit. It is fair to add, though, that administrative practice on this point has not been clarified by a published ANAF position. A calculation that banks on the credit therefore banks on an uncertainty — and the burden of sustaining it falls on you, not on the adviser who sold you the structure.
In figures, starting from gross profit of EUR 100:
Gross profit: 100.
Tax at company level, on distribution (22/78): 22.
Distributable amount: 78.
Dividend tax in Romania (16%): 12.48.
Left to the shareholder: 65.52.
Gross profit: 100.
Corporate tax (16%): 16.
Distributable amount: 84.
Dividend tax in Romania (16%): 13.44.
Left to the shareholder: 70.56.
The comparison is strictly illustrative and ignores the health contribution, deductibility and differences in the taxable base. But it shows the direction: for a Romanian resident who distributes the profit, the Estonian company produces no better outcome than a Romanian SRL paying corporate tax. The Estonian advantage exists only for as long as the money stays inside the company.
From 1 January 2026:
Annual revenue, down from EUR 250,000 previously.
A single rate of 1% on revenue remains.
A full-time employee is a condition of access, not a formality.
Companies whose 2025 revenue was between EUR 100,000 and 250,000 move, from 2026, to 16% corporate tax.
For a digital business under the threshold, with low costs, the micro-company regime remains — on pure arithmetic — hard for any foreign structure to beat. Above the threshold, the discussion moves to corporate tax, and the comparison above becomes relevant. If the question is about a group rather than a single company, it is a separate conversation: a Romanian or a foreign holding.
For services supplied to taxable persons in other member states, the place of supply is, as a rule, where the customer is, and the tax is accounted for by the customer under the reverse charge. In practice, for a B2B digital services provider, the standard VAT rate of the state of registration — 24% in Estonia from 1 July 2025, or the Romanian standard rate — is almost irrelevant: in both cases the invoice leaves without VAT, bearing the reverse-charge mention and requiring verification of the customer's VAT number.
The Estonian rate becomes relevant in other situations: sales to final consumers, supplies to customers in the same state, trade in goods. And where VAT does arise on supplies to consumers across several member states, the special regimes — including the one-stop shop — work identically, regardless of the state of registration. The practical conclusion: VAT is, in itself, neither an argument for nor against Estonia. Anyone choosing a jurisdiction on the VAT rate, in an intra-EU B2B business, is choosing on a criterion that does not apply.
What does matter is the registration threshold and filing discipline: intra-EU reporting obligations, verification of the validity of customers' VAT numbers, and reconciliation between invoicing and returns. In a two-jurisdiction structure these obligations double — and errors of this kind, trivial in appearance, are precisely what triggers the first questions from tax administrations.
I cannot give you market figures I have not verified, but I can give you the list of components: monthly Estonian accounting, the registered address and contact-person service (mandatory for companies without a resident director in Estonia), annual reporting, VAT registration and returns where applicable, tax advice in two jurisdictions — because you will inevitably have both a Romanian and an Estonian issue — and, if the structure is real, the cost of substance: people, premises, decision-making.
To these add an invisible cost: complexity. Every distribution, every shareholder loan, every expense deemed "unrelated to the activity" under Estonian law can trigger an immediate tax liability in Estonia, outside any formal dividend distribution. The Estonian system has its own anti-abuse rules, and they are not gentle.
No. e-Residency is a digital identity. It confers no tax residence, right of residence, visa or citizenship. Tax residence is determined by the criteria of each state's law — in Romania, under art. 7 pt. 28 of the Tax Code — and is evidenced by a residence certificate issued by the tax authority, not by an e-residency card.
In Estonia, as a rule, no — that is the essence of the system. In Romania, however, the question stays open on two levels: if the company is managed from Romania, it is Romanian tax resident and the profit is taxed here regardless of distributions; and if the conditions of art. 40^5 of the Tax Code on controlled foreign companies are met, certain undistributed income can be taxed directly at your level.
Yes, but its treatment must be analysed in both states, and Estonia is less permissive here than assumed. According to the Estonian tax authority, remuneration paid to a non-resident member of the management or supervisory body of an Estonian company is taxed in Estonia — with income tax (22%) and Estonian social tax (33%), payable by the company — regardless of where the work is actually performed; the person must be registered by the company in the employment register. On the other hand, directors' remuneration has its own article in double taxation treaties, and if the work is actually performed from Romania the characterisation may change entirely. This is exactly the kind of question where a generic answer does more harm than good.
Do not ignore it and do not "close it quickly" — liquidation itself generates reportable flows and questions about earlier years. The first step is an honest analysis of the place of effective management for each year the company operated. Depending on the result, the options are: registration in Romania and regularisation of the open periods, building genuine substance in Estonia going forward, or restructuring or relocating the company to a vehicle that matches the facts. All three are done with documents, not hopes.
This article is strictly informational and does not constitute legal or tax advice. Individual situations must be analysed case by case. Legislative position reflected: 18 July 2026.
Time limits run from the moment of communication. An initial discussion clarifies what is alleged, what you need to justify and how the defence is built — before an estimate becomes a tax assessment.