Several tax changes will take place in 2025, and some tax-free thresholds will also change. Due to several tax changes, Estonia is forecast to continue to have a higher annual inflation rate compared to other European countries. The forecast is for inflation in Estonia to be 3.61% in 2025, which is primarily due to the various tax increases outlined below.
Income tax (changes from 01.01.25)
- Personal income tax rate increases from 20% to 22%;
- Income tax rate on distributable profits of a legal entity increases from 20/80 (25%) to 22/78 (28,21%);
- Lower income tax rate (14%) the distinction for regular dividends will be abolished, i.e. dividends will be taxed uniformly with 22% from 2025;
- Credit institutions advance income tax rate increases from 14% to 18%.
VAT (changes from 01.01.25 and 01.07.25)
- From 01.01.25 it will increase accommodation service tax rate from 9% to 13%; and tax rate for press publications From 5% to 9%;
- Starting from 01.07.25 it will increase standard VAT rate From 22% to 24%. Additional 2% rate valid until 31.12.28.
Motor vehicle tax
- A new tax will come into effect in Estonia from January 1st – motor vehicle tax or car tax.
Salary and tax-free income
- Minimum wage rises Up to 886 euros monthly (5.31 euros per hour);
- Income tax-free minimum the maximum amount remains the same For 654 euros per month (7848 euros per year).
- Funded pension payments can be 2%, 4% or 6%;
- Minimum social tax liability the underlying monthly rate increases to 820 euros, from which the amount of social tax is 270.60 euros;
- Tax-free income of a person of retirement age the amount is 776 euros per month (9312 euros) per year. The amount of tax-free income will no longer be linked to the average amount of the old-age pension per month or 12 times the average amount of the old-age pension per year.
Tax exemptions and deductions
- Daily allowance for mission The tax-free limit for foreign missions in 2025 is 75 euros per day for the first 15 days and 40 euros for each subsequent day. The current limits are 50 euros and 32 euros, respectively;
- Compensation for the use of a personal carThe maximum rate will increase to 550 euros per month (calculated based on 0.50 euros/km), compared to the previous 335 euros. This applies if the company's employee uses his or her car for work purposes and keeps a corresponding driving log;
- Reception costs The tax-free limit for reception expenses of legal entities is 50 eurosper calendar month, plus 2% of the amount of payments taxed with personalized social tax made in the same calendar month;
- Health promotion the tax-free limit for expenses is now calculated on an annual basis (400 euros per employee) and the range of benefits has been expanded;
- Tax-free limit for promotional gifts increases from 10 euros to 21 euros per unit;
- Costs for employee accommodation 500 euros per month in Tallinn and Tartu and 250 euros per month in other cases are not considered special benefits. The condition is that the employee's place of residence is at least 50 kilometers from the workplace and the employee does not own real estate used as housing closer to the workplace, and these conditions are met throughout the entire period of accommodation;
- Tax-free income for children, spouse or mortgage interest no longer valid from the 2024 income tax return;
- There are still opportunities to deduct training costs and donations. (up to 1,200 euros, not more than 50% of taxable income) and contributions to the third pension pillar (up to 6,000 euros or 15% of taxable income).
Excise duties
- Gasoline excise duty will start rising from July 1 and will increase by five percent each year for the next four years. The 2025 excise tax increase, together with the VAT increase, will add about 6.3 cents per liter to the price of gasoline.
- Excise duty rates on alcohol and tobacco will increase by 10% in January 2025 and 2026. The initially planned additional alcohol excise tax increase for July will not be implemented in 2025, but the remaining increases will remain in effect.
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