In 2024-2026, Estonian taxes changed more than in several previous years combined. Some changes came into effect, some were postponed, and some were repealed just before they were due to take effect.
Therefore, there are still many articles on the internet that were correct at the time of publication but no longer comply with the current rules.
In this article, we provide an overview of the Estonian tax system in effect in July 2026, explain the most important changes, and highlight what they actually mean for entrepreneurs.
Major changes in 2026
✔ The company's retained earnings continue to be tax-free.
✔ The income tax on distributed profits is 22/78.
✔ Personal income tax is 22%.
✔ The standard ToT (Tax on Turnover = VAT) rate is 24%.
✔ The reduced 14% dividend rate has ended.
✔ The proposed 2% security tax on corporate profits did not come into effect.
✔ Car tax applies from 2025.
Estonian taxes in 2026
| Tax | Current rate | Note |
|---|---|---|
| Retained earnings | 0% | Taxation is only levied upon distribution of profits. |
| Distributed profits | 22/78 | Applicable corporate income tax on dividend payments. |
| Personal income tax | 22% | Flat tax rate. |
| Tax-exempt income (resident) | €700 per month | Universal tax-free income. |
| VAT | 24% | Effective since July 1, 2025. |
| Social tax | 33% | Unchanged. |
| Unemployment insurance | 1.6% / 0.8% | Employee / employer. |
| Car tax | Valid | From 2025 |
Why is there still conflicting information on the internet?
The reason is simple.
Tax changes were planned several years in advance, and some of them were even written into law.
Later, political decisions were changed and several planned changes were not implemented.
In brief, the timeline of tax events is as follows:
- 2024 - Several tax changes were passed, including a plan to raise the income tax rate to 24% in 2026.
- 2025 - income tax increased to 22%, ToT (VAT) to 24%, and car tax came into effect.
- At the end of 2025 - the planned 24% income tax and the planned security tax on corporate profits were abandoned.
- 2026 - 22% income tax remained in effect and universal tax-free income was applied to residents.
If you come across information on the internet about the 24% income tax or the corporate profit security tax, it is most likely outdated.
What does this really mean for an entrepreneur?
If you take dividends from a company
Corporate profits continue to be taxed only when distributed.
If you are a tax resident of a foreign country, the tax rules of your country of residence may apply.
If you sell goods or services
Check that all price lists, invoices, and contracts use the current 24% VAT rate.
In practice, there are still documents that use the old 22% rate.
If the company has a vehicle
Car tax has become a common business expense and is worth considering when preparing a company budget.
If you have postponed tax decisions
The uncertainty of recent years is largely over today.
If you've been putting off major decisions, now is a good time to re-examine your company's tax structure.
Three things that have not changed in the Estonian tax system
Despite frequent changes, the main advantages of the Estonian tax system have remained.
Retained earnings are not taxed.
Profits can be retained in the company and reinvested without corporate income tax.
Corporate income tax only arises when profits are distributed.
This gives the entrepreneur the opportunity to decide for themselves when to withdraw profits.
Estonian tax administration continues to be digital
Most declarations and tax transactions can be completed electronically, and the entire system operates quickly and transparently.
Can you handle it yourself?
Probably yes, if:
- you only need an overview of the current tax rates;
- the company's activities take place only in Estonia;
- your tax situation is straightforward.
It is worth seeking the help of an expert if:
- you are a tax resident of a foreign country;
- the company operates in several countries;
- you want to plan dividend or salary payments;
- You want to assess the impact of tax changes on your company.