Estonia will raise income tax and VAT rates from 2025–2026 under new legislation replacing the temporary 2% security tax with permanent measures.
The Estonian parliament adopted the Act on Amendments to the Simplified Business Income Taxation Act and the Income Tax Act and the Repeal of the Security Tax Act (Amendment Act), which repeals the temporary 2% security tax and introduces permanent tax increases under amendments to the Simplified Business Income Taxation Act and the Income Tax Act on 18 June 2025.
The standard personal income tax and corporate income tax rates will rise from 22% to 24%, effective 1 January 2026.
Additionally, the tax rate for individuals using the simplified business account system will increase from 20% to 22%.
The Amendment Act also permanently establishes the 2% VAT increase to 24% originally introduced as a temporary measure under the Security Tax Act.
The VAT rate change takes effect on 1 July 2025.
Originally passed in December 2024, the Security Tax Act provided for a temporary 2% tax on personal income and corporate profits from 2026, alongside the temporary VAT rate increase. The new legislation removes the temporary framework and replaces it with permanent measures aimed at strengthening national security and ensuring long-term revenue stability.
Earlier, the Estonian government presented a draft bill ( 25-0475 ) to the parliament proposing permanent tax increases to replace the temporary 2% security tax on 9 May 2025.
