The years 2025 and 2026 will bring about a number of important changes in Estonian tax policy, which will affect both individuals and companies. The new tax laws and regulations touch on income tax, tax-free income and other important tax areas, bringing about changes in everyday life and the business landscape.

Tax changes affecting individuals

Income tax and tax-free income

In 2025:

• Income tax rate: 22%(previously 20%)
• Tax-free income: up to 654 euros per month and up to 7848 euros per year, depending on the income of the person (the “tax code” remains in force).
• Tax-free income of old-age pensioners: 776 euros per month and 9312 euros per year

In 2026:

• The income tax rate remains 22%.
• Tax-free income: 700 euros per month and 8400 euros per year, equal for all, regardless of income.
• The tax-free income of old-age pensioners remains the same: 776 euros per month and 9312 euros per year.

Security tax (from 2026)

• New 2% Security TaxApplies to:
  • For salary, pension and taxable allowances.
  • Bank deposit interest, tax-free wages and dividends received from a foreign country.
  • Business income (including FIE business income and income taxable under the Simplified Taxation Act).
  • To the profit received from the sale of real estate and other property.
  • Benefits derived from the sale of securities (including gains withdrawn from investment accounts and gains from securities similar to income tax).
  • For the benefit of the right to cut down the growing forest and the sale of forest material without deductions.

Unemployment insurance and pension payments

• Unemployment insurance premium: 1.6% for employees and 0.8% for employers(unchanged).
• Payment of the accumulative pension: 2%, 4% or 6%(previously 2%). It is possible for a person to decide for himself which rate of payment he chooses.
• Social tax: 33%.

Minimum monthly rate for the basis of social tax: 820 euros, minimum social tax 270.60 euros per month.

FIE and Business Account Taxes

• When a service is supplied to a resident company, a non-profit organisation, a foundation or a legal person to a religious association, account must be taken of the fact that those persons incur additional income tax liability (rate 22/78), which equates the tax burden to the tax burden of a normal employment relationship.
• The additional tax liability is provided to prevent the normal employment relationship from being diverted to a more favourable business account.
• If a legal person pays a fee to a business account to a person providing the service, then the legal person must pay additional income tax on the amount of the service fee 22/78which is reflected TSD in Appendix 6 with code 6080.
• FIE social tax in the quarter: 811.80 euros (820 × 3 × 33%).
• Business income tax rate: 20%(22%, 24% or 26% for those affiliated with Pillar II).
• In order to obtain health insurance, a business account must be credited to a business account at least 2255 euros per month.
• When the receipt is transferred to the business account 40,000 euros per year, must be continued through the FIE or the LLC. The additional tax liability is provided in order to avoid the transfer of the normal employment relationship to a more favorable business account.
• If a legal person pays a fee to a business account to a person providing the service, then the legal person must additionally pay income tax 22/78 on the amount of the service fee.

Minimum wage increase 2025

• The minimum wage in Estonia will rise in 2025 for 66 euros, ranging 886 euros per monthin the case of full-time employment.
• It means 8% growthcompared to 2024, when the minimum wage was 820 euros.
• Minimum hourly raterises 5.31 euros gross(earlier 4,86 euros gross).

Tax changes for companies

Corporate income tax

In 2025:

• From January 1, 2025, the corporate tax rate will rise from 20% to 22%from gross field payments, i.e. 22/78from net cash payments (28.21%).
• From January 1, 2025, the lower dividend tax rate will be abolished 14/86.
• The rate of advance income tax for credit institutions: 18%(up from 14% previously)

In 2026:

• Income tax rate: 22/78, is added 2% Security Tax.

2% of corporate profits (security tax) from January 1, 2026

Tax rate and validity

• 2% of corporate profitsfrom from January 1, 2026.
• Applies for all companieswho has taxable profit.
• The taxable profit is profit recorded in the annual accounts after deduction of expenses.

In case of lossthere is no tax liability and it is not possible to carry forward losses from previous periods.

Distinctive features of the tax base

• Security tax base Unrealized gains are also included, since they are reflected in the accounting profit.
• To avoid double taxation, it is excluded from the tax base:
  • Dividendswhich is already taxed or taxed in a foreign country (if the recipient of the dividend has at least 10% participationin the company paying the dividend).
  • Resident of the company in a foreign country permanent place of businessprofit earned through.

Taxation period and reporting

• Taxation period corresponds to the company's financial year.
• Filing a declarationTo the Tax and Customs Board:
  • No later than the 10th of the 9th month of the following financial year.
  • Tax must be paid for the same date.

Advance payments

• Taxpayers must make advance payments by the 10th day of the last month of each quarter.
• Advance payments in 2026based half of 2025 pre-tax profits.
• Tax will be paid in two equal parts:
  • 10. september
  • December 10
• If the report for the financial year 2025 is not submitted, the basis shall be last report submitted.
• The same principle applies in the future - in the case of a report not submitted by the deadline, the tax is taken into account on the basis of the most recent report.

Advance payments for 2027 and 2028

• Payment terms:
  • March 10
  • June 10
  • 10. september
  • December 10
• In the first half of the yeartax is taken into account from one quarterprofit for the previous or previous financial year, depending on the submission of the report.
• In the second half of the yearbased on quarterly payment a quarter of the profit of the previous financial year.

Tax-free thresholds

• Daily allowance for foreign mission:
  • The first 15 days: 75 euros per day(previously 50 euros per day).
  • The following days: 40 euros per day(previously 32 euros per day).
• Compensation for the use of a personal car:
  • 0,50 euros/km(previously 0,30 euro/km), maximum 550 euros per month(previously 335 euros per month).
• Accommodation costs for employees:
  • Tax-free reimbursable 500 euros per month in Tallinn/Tartu, elsewhere 250 euros per month(provided that the employee lives more than 50 km away and does not have real estate closer). There is no tax advantage for board members, so the coverage of their accommodation costs is treated as a special advantage. This applies to persons who are acting under the contract of a member of the board and who are taxed in accordance with the rules in force on the remuneration of the board member.

Promotional gifts and admission costs

• Promotional gifts: up to 21 euros. This means that a company can transfer products or services tax-free for advertising purposes, as long as their value does not exceed 21 euros excluding VAT.
• Tax-free limit on admission costs: 50 euros per month + 2% of the salary fund(previously 32 euros per month + 2% of the salary fund).

Changes in VAT (from July 2025)

• Standard rate: 24%(previously 22%).
• Rate of accommodation with accommodation services and breakfast: 13%(previously 9%).
• VAT on press publications: 9%(previously 5%).

Motor vehicle tax (from 2025)

Obligation to register and tax the vehicle annually, the exact rates depend on the indicators of the vehicle.

Land tax (from 2025)

• Increase in tax rates, maximum rate of increase 50% or 20 euros(previously 10% or 5 euros in 2024).
• The limit for land tax increases, i.e. the protection mechanism, introduced to prevent a sharp increase in land tax, is 50% or 20 euros in 2025. That is, if the land tax for 2025 is at least 50% more than the amount of the previous (2024) tax, then the tax amount will be increased by 50%. No tax exemptions or incentives are taken into account. If 50% is less than 20 euros, then the amount of land tax is increased by 20 euros, but not more than the amount of land tax calculated on the basis of the tax price of the land and the land tax rate.