A breakdown of the main reforms is:

Income Tax

Starting January 1, 2025, the income tax rate for both individuals and legal entities will rise from 20 percent to 22 percent.

In 2026, an additional 2-percent tax denoted as a national security tax will be introduced, and will be deducted from all state pensions, parental benefits, and other payouts.

Profit distributions by legal entities, previously taxed at the rate of 14 percent, will now be taxed at the new 22 percent rate, again starting in 2025.
Credit institutions will also see their advance income tax rate rise, from 14 percent to 18 percent.

VAT

The standard VAT rate will increase from 22 percent to 24 percent.
Please note that this change does not come into effect on the first day of the new year, but on July 1, 2025.

Accommodation services will no longer enjoy a 9 percent VAT rate, as this is set to rise to 13 percent.

Media outlets, too, will face a VAT increase, from the current 5 percent, to 9 percent.

Car Tax

The new motor vehicle tax first proposed when the previous Reform-SDE-Eesti 200 coalition entered office in April 2023 will become a reality from January 1 next year.

It is applicable to all vehicles registered in the traffic register (X).

The base tax will be €50, with additional charges based on CO2 emissions and vehicle weight.

Land Tax

The maximum rate for residential land will rise from 0.5 percent to 1 percent of taxable value, while commercial land will see a rise from 1 percent to 2 percent.

Excise Duties

Gasoline excise duties, unchanged since 2018, will rise by 5 percent annually starting in 2025.

Excise rates are set to rise on July 1, resulting in a combined impact of excise and VAT hikes amounting to €0.063 per liter on gas.

Tobacco excise duties will rise in two rounds, in January and July 2025.

Although a planned 5-percent rise in alcohol excise duties set for July 2025 has been canceled, alcohol excise duties will rise by 10 percent just over a year from now, in January 2026.

The Riigikogu's Finance Committee cited the growth of cross-border trade – mainly meaning people making the short trip south of the border to Latvia to buy cheaper alcohol - as the reason for this change.

In addition to the above changes, the excise duty on cigarettes will continue to rise in regular increments year-on-year, as it has already done in previous years.
The changes are likely to have significant impacts on businesses and individuals alike, so taxpayers are advised by experts to prepare for the adjustments next year and beyond.

--

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