--- title: How to avoid double taxation if the holding is less than 10%? date: 2026-02-17T11:27:01Z modified: 2026-07-26T10:41:05Z permalink: "https://grow.ee/kuidas-valtida-topeltmaksustamist/" type: post status: publish excerpt: Dividends received from an Estonian company with a holding of less than 10% may result in double taxation. wpid: 15264 featured_image: "https://grow.ee/wp-content/uploads/2026/02/Topeltmakstamine.jpg" timestamp: 2026-07-26T10:41:05Z tags: - Accounting --- ![](https://grow.ee/wp-content/uploads/2026/02/Topeltmakstamine.jpg) ## Why do dividends received from an Estonian company with a stake of less than 10% result in double taxation and how to avoid it? Estonian companies are increasingly investing in the stock exchange and in the stakes of other companies. Unfortunately, there is an important tax difference here, which many are not aware of: if an Estonian legal entity owns less than 10% in an Estonian company or an Estonian listed company, then the exemption of § 50(11) of the Income Tax Act does not apply to these dividends and the dividends cannot be declared in Part II of Annex 7 to the Income Tax Act. This means that dividends are taxed twice: - the company paying the dividends has already paid income tax in Estonia (at a rate of 22/78) - the recipient of the dividends, an Estonian company, must re-tax the dividends received if it wishes to pay them to its owners. Part II of Annex 7 to the TSD declaration, or the exemption method, is intended only for situations where the recipient of the dividends has at least 10% of participation. ## How to avoid double taxation if the participation is less than 10%? The most effective and practically applicable solutions Keep below 10% Estonian share investments in a private investment account Reasons why it is sensible to make small-scale investments in Estonian listed companies through a private investment account rather than through a company: Reasons why it is sensible to make small-scale investments in Estonian listed companies through a private investment account rather than through a company: - A listed company pays income tax on dividends already at the company level. - Taxed dividends received in a private investment account are considered to be an input, so no additional income tax is incurred - When investing through a company, the same dividend is taxed again later if it is paid out from the company - If the company still invests in Estonian shares, prefer growth companies (that do not pay dividends) - If the company invests in a growth company that does not pay dividends (for example, Funderbeam investments), then there is no double taxation. When realizing a profit (on the sale of a company), the investor pays income tax only when distributions are made from the profit. However, think carefully about whether buying shares through a company is still more beneficial: although from a purely tax perspective it may seem that it is better to invest from the company, it should be borne in mind that payroll taxes when withdrawing money from the company may be higher than some double taxation. For large investors, investing through a company may still be reasonable, but it is worth making precise calculations. For foreign dividends, the company can use the credit method (but only for foreign countries!). This does not help with Estonian dividends, but it is important to remember that if dividends are received from a foreign company with a stake of less than 10%, then it is possible to use the credit method of TuMS § 54 (5), i.e. income tax withheld in a foreign country can be deducted from Estonian income tax. ## Summary Dividends received from an Estonian company with a stake of less than 10% are the most inefficient type of dividend income for a company in terms of tax risk, because the exemption method of Appendix 7 of the TSD does not apply. Double taxation can be avoided: - By using a private investment account to invest in Estonian shares with small stakes. - By investing through the company only in growth companies that do not distribute dividends. - If possible, increase the stake to at least 10% so that the exemption method applies. - In the case of foreign dividends, use the credit method (TuMS § 54 (5). ## Talk to our financial expert [ CONTACT US ](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/vota-meiega-uhendust.md)