How FIE and OÜ are taxed in 2026
FIE (füüsilisest isikust ettevõtja) pays 22% personal income tax (PIT) on net profit plus 33% social tax on that same net profit, with a monthly minimum base set annually by EMTA (the recent full-time figure has been around €820/month; check emta.ee for the 2026 number). Advance payments are due quarterly. The FIE is personally liable for business debts — creditors can reach the owner's personal assets. There is no share capital requirement and administration is light: a simple receipts-and-expenses ledger is often enough.
OÜ (osaühing) is taxed under Estonia's distributed-profit regime: 22% CIT is due only when profit is actually distributed as dividends. Retained and reinvested profit is taxed at 0% until it leaves the company. Minimum share capital has been €1 since the 2023 reform (previously €2,500). Liability is limited to company assets. An annual report to RIK is mandatory, monthly bookkeeping is the practical baseline, and any owner who draws a salary pays PIT 22% plus social tax 33% on that payroll line.
Break-even: €20k, €50k, €100k net profit
The crossover between FIE and OÜ is not a revenue number — it is a drawdown number. Assume for a moment the owner distributes all profit personally this year. At €20k net profit, FIE is usually still cheaper once OÜ bookkeeping and annual-report overhead is counted; the tax saving on paper does not cover the admin. At €50k, full distribution is roughly a toss-up, and OÜ pulls ahead as soon as part of the profit is retained. At €100k, OÜ is the cleaner structure on distribution math alone, and the gap widens sharply with any retained profit.
The reason is the 0% rate on undistributed profit. Every euro left inside the OÜ at year-end carries no CIT until it is paid out. The 22% CIT is deferred, not avoided — but deferral compounds, especially for consultants and developers who reinvest into equipment, training, or a cash buffer. Run the numbers on your own drawdown model, not on a generic table.
The non-tax reasons that often decide
Three non-tax factors come up in almost every conversation. First, liability shield: an OÜ separates business debts from personal assets. For any FIE carrying inventory, signing client contracts above €20k, or hiring staff, the protection matters more than the tax arithmetic. Second, credibility with enterprise clients: large procurement departments frequently will not contract with a natural person at all — an OÜ signals operational permanence and makes B2B sales easier. Third, co-founders and equity: bringing in a partner or issuing shares to a key hire is only possible inside an OÜ. A FIE cannot issue shares.
When the switch is the wrong call
The switch is not automatic. Small side-project income — a few thousand euros a year — almost never justifies the OÜ overhead. Short-duration work with a single client, a personal brand with low liability exposure, or client contracts that specifically require FIE invoicing (rare, occasionally found in cultural-sector grants) all push the answer back toward FIE. Paying €300–€600 per year in accounting fees to run an OÜ that earns €8,000 is real margin lost, not a rounding error. If the business stays small on purpose, FIE can be the right long-term answer.
Transition mechanics and timing
Typical timeline for a clean cutover is two to four weeks. Register the OÜ at RIK through the e-Business Register, novate client contracts so invoicing flows through the new entity, re-register for VAT if the FIE held a KMKR number (the VAT number does not automatically carry over), close the FIE activity period at EMTA, and file mid-year PIT and social tax returns for the FIE stub. Bank accounts, e-invoicing set-up, and any payment-provider onboarding should be live on the OÜ before the first invoice is issued.
Timing matters more than most founders expect. The cleanest cutover is 1 January — one closed FIE year, one full OÜ year, no mid-year reconciliation. Second-best is the first day of any month. Avoid mid-quarter switches if the FIE is VAT-registered: reconciling a split KMD period adds work for no benefit. If in doubt, talk to a bookkeeper before you register the OÜ, not after. Sequence errors at the registration stage are cheaper to prevent than to fix.