Double taxation refers to paying the same type of tax on the same income in two different countries—a situation that often affects cross-border business owners or shareholders.

This can usually be avoided if the country where your company is established (e.g. Estonia) and the country where you personally reside have signed a Double Tax Treaty (DTT). These treaties determine which country has the right to tax specific types of income and help prevent you from being taxed twice on the same profit. 

However, if no treaty exists, double taxation may apply. For instance, since Estonia does not have a tax treaty with Russia, a company or individual may end up paying tax both in Estonia and in Russia on the same income.

It’s also important to note that corporate and personal income taxes are separate:

• When a company distributes dividends, corporate income tax is paid on that amount.

• When a private person receives those dividends, they may also owe personal income tax—depending on their country of tax residency.

This is not considered double taxation, as it involves two different taxpayers (a legal entity and a natural person) and two different tax types.

Lead-in:
Double taxation can significantly affect your company’s profits and personal income—but tax treaties between countries often provide a solution.