Below are the main Estonian tax rates that apply in 2026. Earlier there was a plan to raise income tax to 24 percent in 2026. Parliament canceled that increase in December 2025. For this reason, older articles that still speak of a 24 percent income tax are now out of date. The table below shows the actual rates.
| Tax | Rate 2026 | Explanation |
|---|---|---|
| Income tax (individuals and distributed profit) | 22% | A single rate. |
| Undistributed profit | 0% | Taxed only when the profit is distributed. |
| Income tax on distributed profit (formula) | 22/78 | The amount to be distributed is first divided by 0.78. |
| VAT (from 1.07.2025) | 24% | Standard rate. |
| VAT — accommodation | 13% | Reduced rate. |
| VAT — press and books | 9% | Reduced rate. |
| Social tax | 33% | |
| Unemployment insurance contribution (employee / employer) | 1.6% / 0.8% | |
| Tax-free income (for a resident) | up to €700 per month (€8,400 per year) | A single amount; it no longer falls as income rises. |
| Motor vehicle tax | applies from 1.01.2025 | Annual; for a company car, the company pays. |
Sources: the Estonian Tax and Customs Board (emta.ee) and Riigi Teataja. The income tax rate is set in § 4 of the Income Tax Act: “The rate of income tax, except in the events specified in subsections 2 and 5 and in subsection 4 of § 4³, is 22%.” (Riigi Teataja)
What this means in practice
- Dividends. On distribution the company pays income tax of 22/78 — the same as in 2025. Nothing has changed.
- Invoices and price lists. VAT has been 24% since July 2025. Check that your old invoice and price list templates have been updated.
- The company car. The motor vehicle tax is now a real yearly cost line, and it has to be accounted for in the bookkeeping.
Two things stay as they were. Undistributed profit is not taxed — as long as the profit is not taken out of the company, the rate is 0%. And the owner chooses the timing of the distribution: you decide when and how much profit to pay out.
This article was prepared with the help of artificial intelligence.