Tax Changes in Estonia in 2025 and 2026 – Everything You Need to Know About the New Regulations
As of January 1, 2025, new tax regulations have come into effect in Estonia, introducing modifications to income taxation, VAT, and vehicle-related fees. Despite some increases, Estonia’s tax system remains one of the most transparent and business-friendly in Europe. Understanding these new regulations will help you fully leverage the opportunities Estonia offers.
Our lawyers are available to provide professional advice and answer any questions you may have about Estonia’s tax system.
Stable and Predictable Income Taxation
Estonia’s tax system has long been recognized for its simplicity and favorable conditions for entrepreneurs. The recent changes maintain its key advantages, keeping it one of the most competitive in the region.
Personal income tax
- Since 2025, the income tax rate is 22%.
- The tax-free allowance remains at €654 per month (€7,848 annually) and will increase to €700 per month (€8,400 annually) in 2026.
Corporate income tax – Estonian CIT remains attractive
- The corporate income tax rate has increased to 22%, but the deferred CIT model remains – tax is only paid when profits are distributed.
- From 2026, businesses will be required to pay a 2% defense tax – however, the taxable base can be reduced by distributed dividends and foreign branch earnings.
Thanks to these principles, entrepreneurs can reinvest profits tax-free, making Estonia one of the best places to run a business in Europe.
Simple VAT Structure and Competitive Rates
Estonia maintains a transparent VAT system, with new rates still competitive compared to many European countries.
- Standard VAT rate is 24% (from July 2025).
- Accommodation services are taxed at 13%, benefiting the tourism sector.
- Press publications are subject to a 9% VAT rate, supporting media and information accessibility.
Estonia’s VAT system is straightforward, with automated administration that minimizes bureaucratic burdens for businesses.
New Vehicle Regulations – Greater Transparency and Sustainability
From 2025, a vehicle tax and a registration fee have been introduced to enhance environmental awareness and improve road infrastructure.
Vehicle Tax
An annual tax for owners of passenger cars, vans, motorcycles, and tractors.
Registration Fee
A one-time payment upon the first registration of a vehicle or when ownership changes.
Payments can be conveniently made via the e-MTA system, ensuring a smooth and efficient tax process.
Estonia – A Business-Friendly and Investor-Friendly Country
Despite the tax changes, Estonia remains one of the most attractive countries for business. The key benefits of Estonia’s tax system include:
- No tax on reinvested profits – businesses can grow without paying CIT until they distribute dividends.
- Minimal bureaucracy – all formalities can be completed online, making company registration and management quick and efficient.
- Transparent tax system – simple rules and no hidden costs create a stable business environment.
- Advanced digital administration – with e-MTA and other online systems, entrepreneurs can manage taxes effortlessly.
Thanks to these advantages, Estonia continues to attract international investors and entrepreneurs, offering stability, innovation, and favorable business conditions.
If you’re considering setting up a company in Estonia, now is the perfect time! Contact us to learn more about the opportunities Estonia offers.
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