Tax Changes in Estonia (2025)

Estonia is making important tax changes in 2025. These updates will affect everyone individuals, businesses, and consumers. Here’s a simple overview of tax changes in Estonia in 2025 year.

Income Tax and Corporation Tax Changes in 2025

Starting January 1, 2025, income tax will increase from 20% to 22% for both people and companies. Also, businesses will no longer have the option to pay a lower 14% tax on regular profit payouts. This means companies will pay more tax on their profits.

Starting in 2026, all taxpayers will benefit from a universal tax-free income of €700 per month. For pensioners, the tax-free threshold will be €776 per month in 2025

VAT Changes in 2025

From July 1, 2025, the standard VAT rate will increase from 20% to 22%. Specific sectors will see bigger changes:

• • Hotels: VAT will go up from 9% to 13%, making stays more expensive.
  • Newspapers: VAT will increase from 5% to 9%, which could raise subscription and advertising costs.

Value Added Act: https://www.riigiteataja.ee/en/eli/527022014003/consolide

Land Tax

The method for calculating land tax will be revised. Agricultural land will be taxed at a rate of up to 1 percent of its value, while other types of land may be taxed up to 2 percent. Local governments will determine the specific rates.

Car Tax – Changes in 2025

A new car tax will start on January 1, 2025. Every car owner will need to pay a base tax of €50, plus extra depending on their car’s weight and CO2 emissions. This tax aims to encourage the use of environmentally friendly vehicles.

Excise Duties – Changes in 2025

Taxes on specific items will also increase:

• • Fuel: Excise tax on gasoline will rise by 5% every year, starting in 2025.
  • Cigarettes: The tax on cigarettes will increase in two steps, in January and July 2025, making them more expensive.

Simplified Rules for micro companies in the EU

Currently, businesses must register for VAT in any other EU country as soon as they earn revenue there. Without registration, they are limited to operating within local thresholds (e.g., €40,000 in Estonia).

In the future, businesses will be able to operate across EU member states without VAT registration until their total EU-wide turnover reaches €100,000. They will still need to submit a declaration to the Estonian Tax and Customs Board.

Estonia’s 0% Corporate Tax: No Tax on Profits Left in the Business

In Estonia, companies don’t have to pay tax on the money they keep in the business. If a company makes a profit and decides to reinvest it, no tax is owed. This makes it easier for businesses to grow and improve.

However, if the company decides to pay out profits to the owners or shareholders, they must pay 20% tax on that money. The tax only applies to the money that is taken out of the business, not what is kept inside.

This system encourages companies to keep their profits and invest them in growing the business, rather than paying taxes right away.

The Summary of Tax Changes in Estonia in 2025

In 2025, there will be several important tax changes in Estonia. The income and corporation tax rate will increase from 20% to 22% starting January 1, 2025, for both individuals and companies. Additionally, businesses will no longer have the option to pay a lower 14% tax on regular profit payouts, meaning higher taxes on profits.

The VAT rate will also rise from 20% to 22% starting July 1, 2025, with specific sectors like hotels seeing an increase from 9% to 13% and newspapers from 5% to 9%.

The land tax calculation will change, with agricultural land taxed up to 1%, and other types of land up to 2%, determined by local governments. A new car tax will be introduced on January 1, 2025, with a base tax of €50, plus additional charges based on the car’s weight and CO2 emissions.

Excise duties will also rise, with the excise tax on gasoline increasing by 5% annually, starting in 2025. Cigarette taxes will be increased in two stages during 2025, making them more expensive.

In terms of VAT, micro companies will benefit from simplified rules, allowing them to operate across the EU without VAT registration until their turnover reaches €100,000.

Finally, Estonia’s 0% corporate tax policy means companies will not pay tax on profits left within the business. Taxes are only due when profits are paid out to owners or shareholders, at a rate of 20%. This encourages companies to reinvest their profits rather than pay immediate taxes.

Notably, Estonia is ranked #1 in the Tax Foundation’s ranking of business-friendly tax systems, further highlighting its appeal for businesses.

How Eesti Consulting Can Help e-Residents and Other Clients

Eesti offers valuable support to e-Residents and other clients through a variety of services, making business operations in Estonia easier and more efficient. Here’s how they can help:

• • Consultation Services: Eesti provides expert advice on starting and running businesses in Estonia, helping entrepreneurs understand local laws, choose the right business structure, and navigate compliance requirements.
  • VAT Registration: They assist businesses in registering for VAT with the Estonian Tax and Customs Board (EMTA), ensuring that you meet VAT obligations and understand related rules.
  • Accounting Services: Eesti offers professional accounting services, helping businesses manage their finances, file taxes, and stay on top of financial reporting.
  • Administration Services:  We provide legal address and contact person as well.