For years, the Estonia fans' pitch went: "Zero percent tax, as long as you don't distribute." Since 1 January 2026, that line is officially history: Estonia levies a security tax of 2 percent on company profits, whether or not they are distributed. A small rate with great symbolic force, and a good occasion to lay the Estonian OÜ and the US LLC side by side, soberly.
What has actually changed
The Estonian model traditionally taxed company profits only on distribution: retain them tax-free, distribute them at a cost. With the security tax package to finance defence spending, a further rule has applied since the start of the year: 2 percent on annual profit, collected as quarterly advance payments based on the previous year's profit, initially designed as a temporary measure; the details are published by the Estonian Tax and Customs Board, EMTA, and the Ministry of Finance. In parallel, VAT and income tax rates have risen in recent years. Estonia remains a well-run, digital, reputable country, but the era of "0 percent, as long as you're smart" is over, and the direction of travel is clear: upwards.
Why the comparison with the LLC is lopsided, and gets made anyway
To be fair: the OÜ and the LLC were never the same tool. The Estonian OÜ is an opaque corporation in the EU, with financial statement requirements, a public register and now an ongoing profit tax. The US LLC is tax-transparent: it pays nothing itself, the profits land with you and are taxed where you live, at zero with the right setup. Even so, the Estonia pitch was often aimed at exactly our audience, nomads and emigrants, to whom the OÜ was sold as an "EU-compliant 0% solution". For this group, the maths was always shaky: tax-free retention only helps if money sitting in the company does something for you, and Estonia took its share on distribution anyway. Now the 2 percent clock is ticking as well, whatever you do.
The honest map after 1 January
The OÜ remains right for businesses that genuinely need an EU company: EU funding programmes, clients with EU procurement requirements, teams in Estonia. That was always its honest use case, and the new tax changes little about it.
The LLC remains right for the location-independent, international business of someone who has moved abroad properly: transparent rather than retaining, draws without distribution tax logic, no public register showing your figures, US banking and Stripe, and a tax burden set by your country of residence instead of Tallinn.
And the lesson for every structure: the Estonia moment shows what happens to models built on one state's tax policy. Rates change, budgets need money, defence costs. Robust setups depend on your own residence and on transparent attribution, not on a finance minister's promise. That is exactly why our order of things is fixed: first your residence setup, then the tool.
Your next step
If you run an OÜ and the new numbers no longer add up, or you are weighing Estonia against the US right now: you can order the LLC here, and you will find the right state in the atlas. For a switch with running contracts and accounts, book a consultation with Sebastian, held in English: one hour, honest feedback, 15-minute guarantee.
About the author
ZeroTax LLC is a service of Mount Bonnell Advisors in Austin, Texas.
Founder of Mount Bonnell Advisors, Austin, Texas. Has advised more people switching from Estonia since the zero before the decimal point disappeared.
Book a consultation with Sebastian (held in English only)