Starting in 2025, Estonia introduces significant changes to its tax legislation. These changes will affect individuals, businesses, and vehicle owners.
Key changes include:
-
Tax on mechanical vehicles:
- From January 1, 2025, owners of mechanical vehicles will be required to pay a new tax.
- An online calculator is available to calculate the tax amount.
- The law is available in Estonian and English on the Tax and Customs Board website.
-
Changes to income tax rates:
- The rate for individuals will increase from 20% to 22%.
- The corporate tax system will change from 20/80 to 22/78.
- The reduced dividend tax rate (14/86) will be abolished.
- The 7% withholding tax on dividends will also be removed.
-
Temporary defense tax:
- Introduced on July 1, 2025, and will remain in effect until December 31, 2028.
- Main components include:
- From July 1, 2025, the VAT rate will increase by 2% to reach 24%.
- From January 1, 2026, the personal income tax rate will rise to 24%.
- From January 1, 2026, companies will pay an additional 2% corporate profit tax.
- Revenues will be directed towards strengthening defense capabilities and investing in Estonia’s security.