Initial Jul 2025 to Dec 2028 emergency 2% VAT rise will now be permanent
The Estonian Finance Minster and Prime Minister have stated this week that the military emergency 1st July 2025 2% VAT rise from 22% to 24% will be made permanent. The plan had been to withdraw it after 31 December 2028.
There will also be rises in corporate and personal income taxes in July 2025, but the will be reversed at the end of 2028.
With the money raised by the new taxes, the government coalition wants to acquire long-range weapon systems and munitions to be able to defend the threat to Estonian security following the Russian invasion of Ukraine.
From 2026, there will also be a 2% security tax on personal income and company profits.
Jan 2024: Government approves 2% rise in VAT and income tax rates
The new coalition government approved 12 June 2023 a rise in VAT and income taxes. There is a increase in VAT by 2% to 22%.
The reduced VAT rate on accommodation of 9% will rise to 13% reduced rate from 1 July 2025. This is a change from the original proposal of moving to the standard rate.
Press publications will rise from 5% to 9%.
Personal and Corporate Income tax rates – Estonia operates a flat-rate model – will also increase 2% from 20% to 22. The Corporate and Personal Income Tax rates will rise 1 January 2025 according to the Bill. Estonia’s tax regime was ranked as the most competitive amongst OECD members by the Tax Foundation. Check our Estonian VAT country guide.
The Baltic state’s economy has been hit hard by the Russian invasion of Ukraine, and it’s economy shrunk by 4.1% in quarter 4 of 2022, and by 1.3% as a whole for 2022.
