Global Daily Tax News, Estonia To Hike Main Tax Rates By Two Percent, (Sep 20, 2024)

Estonia's Cabinet has approved a temporary hike to personal and corporate income tax burdens as well as a two percentage point hike to the value-added tax rate.

The Government has confirmed that the VAT rate will rise to 24 percent, up from 22 percent in the summer of 2025.

In addition, a new two percent "defence tax" will apply to the income of natural persons and the profits of companies from 2026. The Government has indicated the levy will apply until 2028.

The tax hikes are intended to boost funding for the Government's response to Russia's invasion of Ukraine.

Finance Minister Jurgen Ligi said: "The war continues, and in the coming years we have to make additional contributions to the defense and security of the Estonian state. This is the responsibility of all of us and we all contribute."

The tax base of the security tax for companies will be the accounting profit of the previous financial year before income tax. The tax will be payable in advance, starting in 2026, with two payments due on September 10 and December 10.

In 2027, the advance payment will be paid quarterly. Companies whose financial year follows the calendar year will make payments on the 10th day of March, June, September, and December. A company's liability will then be adjusted when its profits for the year are finalized.