Summary of tax rates and changes to tax-free thresholds that came into effect in Estonia in 2025-2026.
In 2025 and from 01.01.2026, several tax changes have taken place and some tax-free thresholds have also changed. Estonia is still forecast to have a relatively high annual inflation rate compared to other European countries. Tax increases have been a significant accelerator of inflation in recent years. According to Statistics Estonia, inflation in Estonia in 2025 was 4.8%. For 2026, Eesti Pank forecasts an inflation rate of up to 4%. The vast majority of European countries forecast a decrease in inflation for 2026.
Income tax (changes from 01.01.2025)
The personal income tax rate increased from 20% to 22%.
The income tax rate on distributable profits of legal entities increased from 20/80 (25%) to 22/78 (28,21%).
The lower income tax rate (14%) for regular dividends was abolished, i.e. dividends will be taxed uniformly at 22% from 2025.
The advance income tax rate for credit institutions increased from 14% to 18%.
VAT (changes from 01.01.2025 and 01.07.2025)
From 01.01.2025, the tax rate for accommodation services increased from 9% to 13%, and the tax rate for press publications increased from 5% to 9%.
As of 01.07.2025, the general VAT rate increased from 22% to 24%, and the higher tax rate will remain in effect.
Motor vehicle tax
From 01.01.2025, a motor vehicle tax, or car tax, came into effect in Estonia.
However, several tax benefits will apply from 01.01.2026:
- Minibuses with more than seven seats (8 and 9 seats) are taxed at the N category motor vehicle tax rate.
- The tax liability of families with children has been reduced: the amount of a parent's motor vehicle tax will be reduced by up to 100 euros for each child.
- The tax liability for vehicles deleted from the traffic register (destroyed, dismantled, transferred abroad, etc.) and declared wanted by the Police and Border Guard Board is calculated only for the time the vehicle was registered in the traffic register.
Salary and tax-free income
On 01.04.2026, the minimum wage for full-time work will increase to 946 euros. The minimum hourly wage will be 5.63 euros (until 1 April, the minimum wage is still 886 euros per month and 5.31 euros per hour).
In 2026, the so-called tax bracket will disappear, and from January 1, a single maximum tax-free income amount of 700 euros per month will apply (instead of the previous 654 euros).
You can choose the rate of your funded pension payment yourself: 2%, 4% or 6%.
From 01.01.2026, the monthly rate on which the minimum social tax obligation is based will increase to 886 euros, from which the amount of social tax will be 292.38 euros (in 2025, the corresponding limits were 820 euros and 270.60 euros).
The tax-free income of a person of retirement age is 776 euros per month (9,312 euros per year) - this will not change.
Tax exemptions and deductions
As of 01.01.2025, the tax-free limit for daily mission allowance for foreign missions is 75 euros per day for the first 15 days and 40 euros for each subsequent day.
The maximum amount of compensation for the use of a personal car is 550 euros per month (calculated based on 0.50 euros/km). This applies if the employee uses his or her car for work purposes and keeps a driving log.
The tax-free limit for reception expenses for legal entities is 50 euros per calendar month, plus 21% of the amount of payments taxed with personalized social tax made in the same calendar month.
The tax-free limit for health promotion expenses is now calculated on an annual basis: 400 euros per employee.
The tax-free limit for promotional gifts will increase from 10 euros to 21 euros per unit (value excluding VAT).
The costs of housing an employee are not considered a fringe benefit in Tallinn and Tartu up to 500 euros per month and in other cases up to 250 euros per month, provided that the employee's place of residence is at least 50 km from the workplace and the employee does not own real estate used as housing closer to the workplace. These conditions must be met throughout the entire period of accommodation.
Training costs and donations up to 1,200 euros (but not more than 50% of taxable income) and contributions to the third pension pillar up to 6,000 euros (but not more than 15% of taxable income) can be deducted from the taxable income of an individual.
Excise duties
Excise duty rates on alcohol and tobacco increased by 10% in January 2025 and 2026.
Various fuel and electricity excise taxes will also increase in May, for example, the gasoline excise rate will be 5% and the diesel excise rate will be 7%.
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