--- title: The government made the VAT increase permanent and abolished the profit tax 2% date: 2025-05-09T13:29:22Z modified: 2025-05-26T11:10:01Z permalink: "https://grow.ee/valitsus-muutis-kaibemaksutousu/" type: post status: publish excerpt: The government decided to make the VAT increase permanent, which means that the current temporary tax increase will remain in effect indefinitely. wpid: 14823 featured_image: "https://grow.ee/wp-content/uploads/2025/05/Kuvatommis-2025-05-09-162418.png" timestamp: 2025-05-26T11:10:01Z tags: - Taxes --- ![](https://grow.ee/wp-content/uploads/2025/05/Kuvatommis-2025-05-09-162418.png) The government decided to make the VAT increase indefinite, which means that the current temporary tax increase will remain in effect indefinitely. On the other hand, the corporate profit tax +2% was abolished, which would have disrupted Estonia's simple tax system and resulted in development costs for both the state and entrepreneurs. **Good news and bad news: income tax system restored, VAT increase indefinitely** The government's decision to restore the previous system, where companies pay income tax only on distributed profits, not on current profits, preserves the simple tax system in Estonia, which has been widely recognized internationally. The change also eliminates the 2 percent income tax liability of natural persons from the first euro, but the income tax rate will still reach 24 percent from 2026. In return, the government decided to make the temporary VAT rate increase indefinite. Thus, the tax rate will be 24 percent from 1 July 2025 and there are no plans to reduce it. The reason is the need to ensure stable financing for defense costs, which are permanently high. **What will the changes entail?** Making the VAT increase indefinite means that consumers will have to take into account higher prices for a longer period of time. The changes restore the logic of the Estonian tax system and prevent companies from being placed under additional tax pressure. This is a much-needed relief in today's difficult economic situation, contributing to the stabilization of public finances and ensuring security. The implementation of the security tax in its original form would have required the development of the Tax and Customs Board's IT systems, the estimated costs of which would have been 950,000 euros in 2025, 735,000 euros in 2026 and 525,000 euros in 2027. Thus, significant savings in IT development costs will also be achieved. **Estonian VAT rate in the context of the European Union** The increase in the standard VAT rate to 24% from 1 July 2025 will place Estonia among the countries with higher VAT rates among the European Union member states, although it will still be below the rates of Hungary and Scandinavian countries. **Comparison with other EU countries:** - **Hungary**: 27% (highest in the EU) - **Finland**: 25.5% - **Sweden and Denmark**: 25% - **Greece**: 24% - **Estonia**: 24% (from July 2025) - **Ireland and Poland**: 23% - **Spain, Lithuania, Latvia, Czech Republic, Netherlands**: 21% - **Germany and Romania**: 19% - **Luxembourg**: 17% (lowest in the EU) The increase in the VAT rate in Estonia may affect the purchasing power of consumers and the pricing strategies of companies. ## **Use the opportunities of the digital age for the success of your company!** **Come for a free consultation!** [ CONTACT US ](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/vota-meiega-uhendust.md) [ ![](https://grow.ee/wp-content/uploads/2026/06/Kuhu-riiki-ma-sotsiaalmaksu-tasun-300x167.png) ](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/mis-vahe-on-sellel-kuhu-riiki-ma-oma-sotsiaalmaksu-tasun.md) ##### [Does it matter in which country I pay my social tax?](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/mis-vahe-on-sellel-kuhu-riiki-ma-oma-sotsiaalmaksu-tasun.md) June 26, 2026 Your social tax determines health insurance and pension - does it go to the right country? [ ![Working abroad](https://grow.ee/wp-content/uploads/2026/05/Tootamine-valismaal-300x163.png) ](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/millega-peab-tooandja-arvestama-kui-tootaja-tahab-teise-riiki-kaugtood-tegema.md) ##### [Working from abroad: what does the employer need to know?](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/millega-peab-tooandja-arvestama-kui-tootaja-tahab-teise-riiki-kaugtood-tegema.md) May 21, 2026 Working from abroad brings with it tax and legal issues that the employer needs to be aware of. [ ![](https://grow.ee/wp-content/uploads/2026/04/Finantsjuhtise-teenus-300x167.png) ](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/millal-ettevote-vajab-enamat-kui-raamatupidamist.md) ##### [When does a company need more than accounting?](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/millal-ettevote-vajab-enamat-kui-raamatupidamist.md) Apr 20, 2026 4 signs that a company needs more thought and extra power in financial management.