Estonian government greenlights hotel, press VAT rate hikes

Sitting of Kaja Kallas' third government in Stenbock House. Photo is illustrative.
Sitting of Kaja Kallas' third government in Stenbock House. Photo is illustrative. Source: Ken Mürk/ERR

The Estonian government on Monday approved four bills of amendments to tax laws set to hike VAT rates for hotels as well as press publications, thereafter sending the bills back to the Riigikogu for their second readings.

At its Monday sittting, the government approved and returned to the Riigikogu bills of amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act, the Gambling Tax Act, the Value-Added Tax Act as well as the Income Tax Act and the Military Service Act.

According to the bill, on January 1, 2024, the VAT rate in Estonia will increase from the current 20 to 22 percent. The VAT rate for accommodation, meanwhile, will increase in 2025 from the current 9 to 13 percent, which is a lower increase than initially proposed. The VAT rate on press publications, however, will be raised from the current 5 to 9 percent.

Excise duty rates on alcohol as well as on cigarettes and smoking tobacco are set to increase at a rate of 5 percent annually for three years starting in 2024. A planned excise duty rate hike on diesel fuel for specific purposes has been canceled, leaving the excise duty rate for this type of fuel at €21 per 1,000 liters — the minimum rate allowed by the EU.

The tax rate on gaming tables will increase from €1,278.23 to €1,406. The tax rate on gaming machines used for games of skill will be rounded from €31.95 to €32. The tax rate on lottery and commercial lottery, meanwhile, will go up from 18 to 22 percent. The tax rate on remote gambling is set to increase from 5 to 6 percent from next year and 7 percent from January 1, 2026.

To be abolished from next year are supplementary tax exemptions for child support and for spouses as well as the right to deduct housing loan interest payments from one's taxable income, while both personal and corporate income tax rates are set to increase from 20 to 22 percent from 2025.

The bill will also abolish the 14 percent preferential rate on companies' regularly distributed profits as well as, in connection with this change, the 7 percent income tax withheld from dividends paid to natural persons.

From 2025, Estonia will implement a uniform basic exemption of €700 per month, or €8,400. The exception to this will be those of retirement age, whose exemption will equal the average old-age pension.

Changes were made to the bills in accordance with proposals from the Ministry of Finance. The government declined to take all other submitted proposed changes into consideration.

The opposition submitted a total of more than 1,000 proposed changes to the tax bills in question, which would have allowed for discussions regarding the bills to be drawn out, obstructing the Riigikogu's normal operations. As a result, the government opted to tie the bills to a confidence vote.

The Riigikogu is scheduled to approve the bills alongside the confidence vote in the government this Wednesday, June 14.


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Editor: Aili Vahtla

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