The government on Tuesday reached an agreement regarding planned tax changes. Estonia will be introducing a so-called broad security tax consisting of three components.

Starting July 1, 2025, the value added tax (VAT) will increase by two percentage points to 24 percent. Starting in 2026, a 2 percent security tax will be imposed on individuals' taxable income, and a 2 percent tax will likewise be introduced on corporate profits. The corporate tax will be calculated based on a company's profits for the previous financial year, and be paid quarterly.

According to Finance Ministry calculations, the 2 percent VAT hike will bring in €113 million in tax revenue next year, €235 million in 2026, €242 million in 2027 and €252 million in 2028.

The 2 percent tax on individuals' income will bring in an additional €359 million for the state in 2026, €378 million in 2027 and €397 million in 2028.

The 2 percent corporate profit tax, meanwhile, will net the state €157 million in 2026, €164 million in 2027 and €173 million in 2028.

In all, these three taxes or tax hikes are slated to bring in €751 million for the state in 2026, €784 million in 2027 and €822 million in 2028, or €2.357 billion over three years. Add to that the €113 million from next year's 2 percentage point VAT hike, and the state can expect to see a total of €2.47 billion by the end of 2028.

Collection of the broad security tax is planned to conclude in 2028.

The final version of the state budget bill to be submitted to the Riigikogu will be drawn up by the Ministry of Finance by next week.

--

Follow ERR News on Facebook and Twitter and never miss an update!