Confirmed: military emergency VAT rise following Jan 2024 2% increase
Estonia’s government has confirmed a July-announced temporary VAT increase. The rate will rise from 22% to 24% from 1 July 2025. The rise would expire, and the rate return to 22% from 1 January 2029.
There will also be rises in corporate and personal income taxes.
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%. This came into effect on 1 January 2024.
The reduced VAT rate on accommodation of 9% will rise to 13% reduced rate from 1 January 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.
