Rental income taxation in Estonia depends on whether you operate as a private individual or through a company.
Both have their advantages β acting as a private person is simpler and quicker to manage, while operating through a company allows you to accumulate capital and grow your portfolio more tax-efficiently.
π§Ύ 1οΈβ£ When the landlord is a private individual
If a private person rents out an apartment or house (used as a residence), this income is taxable.
In 2025, the income tax rate is 22%.
You can automatically deduct 20% of rental income as presumed expenses (for residential leases).
That means only 80% of the income is taxable.
Example:
If rental income is β¬7,200 per year, then
Tax = β¬7,200 Γ 22% = β¬1,584
After applying the 20% expense deduction β β¬1,584 Γ 0.8 = β¬1,267 payable tax.
Rental income is declared in the annual tax return for the full calendar year (on emta.ee).
π’ 2οΈβ£ When the landlord is a company
Company income is taxed only when profits are distributed (for example, as dividends).
If the profit remains in the company and is reinvested, no income tax is applied.
The company can deduct expenses such as:
- Renovation and maintenance costs
- Furniture and household appliances
- Broker fees
- Loan interest and notary fees
This makes taxation much more flexible.
Example:
Annual rental income: β¬12,000
β Expenses (renovation, interest, management): β¬2,000
β Profit: β¬10,000
If the profit is paid out as dividends:
- 20/80 method: tax β¬2,500 β net to owner β¬7,500
- 14/86 + 7% method: total tax approx. β¬1,800 β net to owner β¬8,200
πΌ 3οΈβ£ Capital accumulation and reinvestment
Many investors do not take dividends immediately, but keep the profit inside the company to buy new properties or finance down payments for loans.
If profit remains in the company:
- No tax is paid until dividends are distributed
- The company can use retained profit as equity for the next investment
- Banks see a stronger balance sheet, offering better loan conditions
Practical example:
A company earns β¬10,000 rental profit per year and keeps it in the firm.
Next year, it adds another β¬10,000 and takes a β¬90,000 loan to buy a new apartment.
Result β the capital grows tax-free, and the portfolio expands without paying taxes right away.
π‘ Brokerly tip
If your goal is to grow a rental portfolio and use bank leverage, operating through a company is smarter β reinvested profit is not taxed.
If your goal is a single apartment and simple extra income, the private individual model is easier and sufficient.
π Tax comparison table (2025)
| Landlord type | Taxable base | Tax rate | Effective tax | Declaration | Best suited for |
|---|---|---|---|---|---|
| Private person | 80% of rent | 22% | 17.6% of total | Annual (e-MTA) | 1β2 apartments, simple setup |
| Company (20/80) | Profit (after costs) | 22% | 20β25% (dividends) | Monthly TSD + annual report | If taking out profit |
| Company (14/86 + 7%) | Profit (after costs) | 14% + 7% | ~18% | Monthly TSD + annual report | For regular dividends |
| Company (capital retained) | Profit kept in firm | 0% (deferred) | 0% until dividends | Monthly TSD | For portfolio growth |
β
Summary
In 2025, Estonia remains investor-friendly in rental taxation.
For individuals β simple, 17.6% effective tax, annual declaration.
For companies β tax-free profit accumulation and flexible reinvestment.
If you aim to build a property portfolio, use a company structure.
If you want stable income with simplicity, stay as a private landlord.
