The year 2025 will bring several significant changes to the Estonian tax system. They affect both individuals and businesses, which is why it is important to be aware of what changes lie ahead and how they will affect everyday life.<\/p>\n
As of 01.01.2025, the following are valid:<\/p>\n
NB! It should be noted that if the salary payment for December 2024 takes place in January 2025, the salary must be taxed at new tax rates.<\/em><\/span><\/p>\n For a resident natural person, the income tax rate<\/strong> will change from 20% to 22% <\/strong>compared to 2024 vs 2025. When submitting the income tax return of a resident natural person (hereinafter the income tax return), it must be known that the income tax rate of 20% applies to the income tax return for 2024 (submitted from 15.02.2025) and the income tax return for 2025 is subject to an income tax rate of 22% (submitted from 15.02.2026).<\/p>\n In both years, the following are entitled to deduct from taxable income:<\/p>\n In addition, starting from 01.01.2025, the funded pension payment rate is 2%, 4% or 6%<\/strong>, depending on the person’s application to the pension registrar. If no application has been made for a higher rate (the deadline was November 30, 2024), then in 2025 the default payment rate will apply at 2%. The application can be submitted by 30 November each year at the latest, and the rate can be changed once a year. The new payment rate will always apply from 1 January. The state will continue to add 4% of the social tax to the II pillar at the expense of 33%, this will not change. NB! In addition to the fact that the obligation to pay the employees’ funded pension payment has to be checked three times a year, accountants are now obliged to check the funded pension contribution rate of a person who has joined the II pillar once a year.<\/em><\/span><\/p>\n From 01.01.2025, the corporate income tax rate will also increase from 20% <\/span>to 22%,<\/strong> i.e. on 22\/78 net disbursements<\/strong>. It is important that in this regard, the lower tax rate of 14\/86 on dividends also disappears, and in the future it is not necessary to withhold 7% income tax on dividends paid to a natural person. Thus, from 2025, the dividend will be taxed only at the rate of 22\/78.<\/p>\n NB! The payment of dividends received earlier and not paid at a lower rate is still subject to the obligation to withhold 7% from the dividend paid to a natural person.<\/em><\/span><\/p>\n With the adopted amendments to the Income Tax Act, several tax-exempt limits were raised from 01.01.2025.<\/p>\n NB! <\/em>The part that exceeds the tax-exempt limit is taxed as salary<\/strong> with income tax, social tax and, in most cases, unemployment insurance and funded pension payments. <\/em><\/span><\/p>\n NB! <\/em><\/strong>A benefit that exceeds the tax-exempt limit is taxed as a fringe benefit<\/strong> with income tax and social tax.<\/em><\/span><\/p>\n Expenses made on improving employees health<\/strong><\/p>\n The following expenses made for improving the health <\/span>of the employee in the amount of 400 euros<\/strong> per employee per year<\/strong> are not taxed as fringe benefits if the employer has provided them to all employees:<\/p>\n The annual limit of 400 euros (instead of the previous 100 euros per quarter) gives freedom and flexibility, e.g. it is possible to buy a sports club package for a year or pay health insurance premiums for a year, which may be more favourable than quarterly payments.<\/p>\n Within the limit, the following are also exempt from tax:<\/p>\n As of 01.01.2025, the following are valid:<\/p>\n When providing services to a resident company, non-profit association, foundation and religious association that is a legal person, it must be taken into account that these persons will have an additional income tax liability (rate 22\/78), which equates the tax burden with the tax burden of a normal employment relationship. The additional tax liability is intended to prevent the normal employment relationship from being transferred to a more favourable entrepreneur account.<\/p>\n If a legal person pays a fee to the entrepreneur account to the person providing the service, then the legal person must additionally pay income tax on the service fee amount 22\/78 in Annex 6 to the TSD with code 6080.<\/p>\nDeductions from the income of a natural person<\/strong><\/span><\/h3>\n
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\n<\/span><\/p>\nCorporate income tax<\/strong><\/span><\/h3>\n
Tax-exempt limits are changing<\/strong><\/span><\/h3>\n
The tax-exempt limit of the daily allowance<\/strong> for missions abroad <\/span>will increase:<\/h5>\n
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The tax-exempt limit on the compensation for the use of personal car<\/strong> increases:<\/h5>\n
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The tax-exempt limit for promotional gifts and reception costs<\/strong> <\/span>will increase:<\/h5>\n
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In addition, business-related expenses incurred in order to accommodate an employee <\/strong>with an employment contract are no longer considered a fringe benefit <\/span>if both conditions are met:<\/h5>\n
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Entrepreneur account and taxes<\/strong><\/span><\/h3>\n
Tax rate on business income<\/strong><\/h5>\n
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Provision of services to a legal entity<\/strong><\/h5>\n