The Tallinn city government has approved a regulation setting a 10 percent annual cap on land tax increases in the capital starting in 2026, along with a tax exemption of up to €1,000 for residential land. If the land tax owed by a taxpayer for their residential property is less than €1,000, the exemption will match the tax amount, meaning the user will pay no land tax on their residential land up to that €1,000 limit.

Beginning next year, municipalities will have broader authority to determine land tax rates. Under the law, city councils must establish the maximum allowable annual increase in land tax — ranging from 10 to 100 percent — by October 1 of the year preceding the tax period. Tallinn has opted to apply the maximum so-called "growth brake," meaning the city will implement the smallest allowable increase permitted by law.

In 2025, more than €1,000 in land tax will be owed by 361 individuals in Tallinn. If the exemption of up to €1,000 for residential land and the 10 percent cap on tax increases are in place for 2026, that number will rise to 451 individuals.

In 2025, approximately 170,000 homeowners in Tallinn will be exempt from paying land tax, amounting to a total of €16.8 million. The highest residential land tax exemption is €3,659. If the city decided not to apply the exemption in 2026, the number of individual land taxpayers would increase to around 200,000.

While the Land Tax Act currently limits annual increases to 50 percent or €20 for 2025, starting in 2026 the plan is to cap the increase at 10 percent to avoid steep hikes.

Land tax is a national tax established by the Land Tax Act, but all revenue from it is allocated to the local government's budget.

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