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From 2026: Higher Income Tax Rates in Estonia
- Bizzvance
- Aug 13
- 2 min read
Updated: Sep 23
UPD (September 19, 2025): The planned income tax changes have been postponed by the Estonian Parliament.
In June 2025, the Riigikogu approved Bill 645 SE, introducing significant changes to Estonia’s tax system that will impact both individuals and companies from 1 January 2026. The key updates include higher income tax rates and the removal of the temporary “security tax.”
1. Corporate and Personal Income Tax Rates to Rise to 24%
From 1 January 2026, both corporate and personal income tax rates will be set at 24%, replacing the previously planned temporary security tax. Under Estonia’s unique system, retained and reinvested profits remain tax-free, with tax only levied upon distribution (dividends). From 2026, the corporate tax rate on distributed profits will be 24%.
2. Abolition of the Security Tax
The planned temporary “security tax” — an additional 2% levy on income intended to run until the end of 2028 — will be abolished. Instead, a single, permanent income tax rate of 24% will apply from 2026.
3. Small Business Income Tax Changes
According to the official e-Residency programme, from 2026 the Entrepreneurship Account scheme will have a 22% rate for those not participating in the 2nd pension pillar, or 24–28% depending on participation level (e-Residency).
Why this matters for companies
The Estonian Chamber of Commerce and Industry (KODA) notes that replacing the temporary security tax with a permanent fixed rate simplifies tax planning, increases predictability, and removes a short-term layer of complexity for businesses and investors.
Parameter | Until 2025 | 2025 | From 2026 |
Personal & corporate income tax | 22% | remains 22% | 24% (fixed) |
Security tax | none | planned | abolished |
Entrepreneurship account tax | — | — | 22% or 24–28% (pension-related) |
Corporate tax base | distributed profits | same | same, but at 24% rate |
How businesses should prepare
Review profit distribution strategy — consider paying out dividends before the end of 2025 to take advantage of lower rates.
Update financial models and budgets — include the increased tax burden in 2026 forecasts.
Adjust contracts and partner agreements — ensure compliance with new rates.
Monitor MTA (Tax and Customs Board) guidance — expect detailed instructions on the transition.
Official source:
