According to the Constitution of the Republic of the Estonia national taxes, encumbrances, fees, fines and compulsory insurance payments are established by law. The legal basis for taxation is established in the Taxation Act. This Act specifies the rights, obligations and liability of tax authorities and taxable persons, the procedure for tax proceedings and the procedure for the resolution of tax disputes.
The Estonian tax system consists of state taxes provided and imposed by taxing Acts and local taxes imposed by local councils in its administrative territory pursuant to the Local Taxes Act.
State taxes
Tax Base
Residents pay tax on their worldwide income. Taxable income includes, in particular, income from employment (salaries, wages, bonuses and other remuneration); business income; interest, royalties, rental income; capital gains; pensions and scholarships (except scholarships financed from state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.
Non-residents pay income tax on their income from Estonian sources as listed in the Income Tax Act. Income taxable in Estonia includes subject to certain conditions income from employment or government services provided in Estonia; directors' fees; business income; income from provision of services; income derived from commercial lease; royalties; certain types of capital gains; gains from disposal of assets registered in Estonia; interest received from the holding in a contractual investment fund (when more than 50 per cent of its assets consist of immovables situated in Estonia); income of a sportsman or an artiste from his activities in Estonia; pensions, scholarships and insurance indemnities.
Unilateral relief for double taxation in respect of income derived from abroad is available in the form of ordinary tax credit with per country limitation. The credit is limited to the Estonian tax computed on the item of income. Moreover, double taxation of employment income is avoided by way of exemption method if all the following conditions are fulfilled:
- the person has stayed in the foreign state for the purpose of employment for at least 183 days over the course of a period of 12 consecutive calendar months;
- the specified income has been the taxable income of the person in the foreign state and if this is certified and the amount of income tax is indicated on the certificate (even if the amount is zero).
Exemptions
Annual basic exemption (non-taxable amount) for resident individuals is up to 8400 EUR per year (700 EUR per month).
The basic exemption for people who have reached the pensionable age is a fixed amount based on the average old-age pension. In 2026 the basic exemption during the pensionable age is 776 euros per month and 9312 euros per year.
Taxpayers can deduct training expenses and certain charitable gifts and donations (up to 1200 euros per year but not more than 50% of taxable income). Contributions to supplementary funded pension system are deductible as well (up to 6000 euros or 15% of taxable income). Mandatory social security contributions are fully deductible.
The same deductions are available for certain non-resident individuals deriving their taxable income in Estonia.
Certain categories of income of resident and non-resident individuals are not subject to tax, such as scholarships paid on the basis of law; fringe benefits (taxable at the level of employer); child allowances and other subsidies and benefits paid from the State, local, or Social Insurance budgets; per diem and accommodation reimbursements for business trips; compensation for the use of private vehicles; insurance proceeds and other payments received under insurance contracts; inheritances and gifts received; gains from the alienation of movables in personal use and from the alienation of taxpayer's main home; lottery winnings; expropriation payments and compensation received for expropriation.
Income of the following persons is not subject to tax in Estonia: foreign diplomatic representatives, consular representatives, special or diplomatic missions, representatives of international or intergovernmental organizations and co-operation programs exercising their official functions in Estonia, plus persons employed with them who are not citizens or permanent inhabitants of Estonia. The above-mentioned persons, with the exception of the members of representations of co-operation programs, must be registered in the Ministry of Foreign Affairs.
Taxable income derived by a self-employed person from the realisation of self-produced, unprocessed agricultural products up to the amount of 2877 euros is not subject to income tax.
Rate Structure
Tax rate is 22% of the taxable income. The withholding tax rate for certain pensions and certain payments made to non-residents is 10%. Employment income is subject to a withholding tax at the general rate of 22%.
The period of taxation is a calendar year and tax returns are due by April 30 of the year following the period of taxation.
Tax allocation
Local governments receive 5,5 per cent of resident natural persons' state pension and 11,29 per cent of resident natural persons’ other taxable income (without taking into account mandatory and supplementary pension, regularly distributed dividends, gains from the transfer of property) according to the taxpayer’s place of residence. All other receipts of income tax are received by the state.
Tax Base
In Estonia profits are not subject to tax when they are earned, but the moment of taxation is deferred until the distribution of profits. Estonia levies corporate income tax on profits that are distributed as dividends, share buy-backs, capital reductions, liquidation proceeds or deemed profit distributions (such as transfer pricing adjustments, expenses and payments not related to business, gifts, donations and entertainment expenses).
Fringe benefits are taxable at the level of employer. Employer pays income tax and social tax on fringe benefits.
Dividends distributed by Estonian companies are exempt from corporate income tax (‘participation exemption’) if these are paid out of:
-
dividends received from Estonian, EU, EEA (European Economic Area) and Swiss tax resident companies in which the Estonian company has at least a 10% shareholding;
-
profits derived through a permanent establishment (“PE”) in the EU, EEA or Switzerland;
-
dividends received from all other foreign companies in which the Estonian company has at least a 10% shareholding, provided that either the underlying profits have been subject to foreign tax or foreign income tax was withheld from dividends received;
- profits derived through a foreign PE in all other countries, provided that such profits have been subject to tax in the country of the PE; or
- liquidation proceeds, payments upon share buy-backs or capital reductions, which have been subject to taxation by the distributor of such income.
Rate Structure
Distributed profits are generally subject to a 22% corporate income tax (22/78 on the net amount of profit distribution). As the tax period of corporate entities is a month, the income tax shall be returned and paid monthly by the 10th day of the following month.
Tax base
National land tax is paid on all land except:
- where economic activity is prohibited;
- land attached to buildings of diplomatic or consular missions of foreign countries;
- cemeteries and land under churches and temples of congregations;
- land used by foreign country or international organisation;
- land in the use of the headquarters of allied forces. In addition, local land tax is not paid on land in municipal ownership or land in public use based on the decision of the local authority.
The amount of land tax is calculated by multiplying the taxable value of land by the applicable tax rate.
The taxable value of land is determined through regular land valuation, using mass appraisal methods based on market information. The object of valuation is the land parcel excluding buildings, standing timber, vegetation, and other attachments.
The tax is generally payable by the owner of the land, and in certain cases by the user of the land.
Tax rate
The land tax rate ranges from 0.1% to 2.0% of the taxable value of land, depending on the land use category. Specific tax rates are set by the municipal council of the relevant local authority. Land where economic activity is restricted by law is either exempted from tax completely or by 50% of the standard tax rate, depending on the nature of restriction.
Land tax is payable in two instalments, by 31 March and 1 October. If the total annual land tax amount is up to EUR 100 – it must be paid in full by 31 March.
Exemptions
There are following exemptions:
Landowners are exempt from paying land tax on residential land up to EUR 1,000 per year.
The exact amount of the exemption is determined by the municipal council. Residential land for this purpose means land owned by a person where their official residence, as recorded in the population register, is located;Local authorities may grant additional land tax relief to pensioners, and/or persons repressed by Soviet authorities.
Tax allocation
Tax accrues wholly to local budgets of the cities and rural municipalities. The tax is administered by the Estonian Tax and Customs Board.
Gambling tax is imposed on amounts received from lottery, promotional lottery, toto (totalisator + betting), remote gambling and tournament of game of chance. Tax is charged also on gambling table and machine used for game of chance and game of skill located on licensed premises.
Gambling tax is imposed on:
- gambling table and gambling machine used for organising games of chance and gambling machine used for organising games of skill;
- amount received from sale of lottery tickets;
- amount received from winning fund of promotional lottery in case the winning fund is more than 10 000 euros;
- total amount of bets, less the winnings in the event of organising a toto;
- total amount of bets, less the winnings in the event of organising an online game of chance or game of skill;
- amount received from participation fee, less the portion of the prize pool in the tournament of game of chance taking place as a tournament;
- amount received from participation fee in the tournament of game of chance taking place as a ring game.
Tax is paid by authorised operators, tax period is one calendar month.
The taxable period for the promotional lottery shall be the period during which the promotional lottery is organised, starting on the first day set out in the rules of the game for placing stakes and ending on the last day set out in the rules of the game for awarding prizes.
The taxable period for the tournament of game of chance shall be the period during which the tournament of game of chance is organised, starting on the first day set out in the rules of game for passing participation fee and ending on the last day set out in the rules of game for passing participation fee.
Tax Rates
Tax rate for one gambling table is 1278,23 euros and 31,95 euros per one machine for organising games of skill. The rate for organising games of chance is 300 euros per gaming machine and 10% of the total bets made on the gaming operator’s gambling machines of games of chance, less the winnings. The rate for lottery and promotional lottery is 18%. The rate for organising a toto, remote gambling and tournament of game of chance is 5%.
Tax Allocation
Gambling tax is paid into the state budget. The Cultural Endowment of Estonia shall receive 47,8% of the amount of gambling tax paid into the state budget of which 60.6 per cent is allocated to cultural buildings and 3.8 per cent is allocated to the development of the creative work of teachers of the fine arts and folk culture specialisations.
Tax is administered by the Estonian Tax and Customs Board.
Value-added tax is charged on supplies of goods and services in the course of business activities and self-supply of goods and services.
Goods are things, livestock, gas, electric power, heat and refrigeration. Services means the provision, in the course of business activities, of benefits or transfer of rights, including securities, which are not goods. Obligation to refrain from economic activity, to waive the exercise of right or to tolerate a situation for charge are regarded also as services.
According to the VAT Act export of goods means dispatching of Community goods from the Community customs territory. Import of goods means the entry into the Community of the goods from third countries.
Intra-Community acquisition of goods means trading activities between Member States. Intra-Community supply of goods is taxable transaction, which must contain transfer of goods to a taxable person from one Member State to another and the taxable person must be registered. Place of supply of goods is Member State where goods are dispatched and the VAT rate is 0%. The acquirer will pay VAT in the country of destination.
Requirements of invoices are harmonized in the European Union.
Taxable person is a person engaged in business who is registered as taxable person. Taxable person shall add of the amount of VAT to the taxable value of the goods transferred or services provided, calculate the amount of VAT due pursuant to pay, pay VAT, preserve documents and maintain records and issue invoices in accordance with requirements.
Taxable person with limited liability is a person, except a natural person not engaged in business or registered taxable person, who is registered or required to register as a taxable person with limited liability.
The threshold for obligatory registration as a taxable person is 40 000 euros. The threshold for taxable person with limited liability is 10 000 euros in case of acquisition of goods, there is no threshold in case of acquisition of services.
Taxable period is one calendar month and value added tax returns shall be submitted to the tax authority by the twentieth day of the month following the taxable period.
Tax rates
The standard rate of VAT is 24%. The reduced rate is 13%, 9% and 0% in some cases. VAT rate is 13 per cent for accommodation services or accommodation services with breakfast.
VAT rate is 9 per cent for:
- books and electronic books (excluding books for education);
- medicinal products, contraceptive preparations, sanitary and toiletry products, and medical equipment or medical devices intended for the personal use of disabled persons within the meaning of the Social Welfare Act and specified in the list established by a regulation of the Minister of Social Affairs
- periodical publications (including electronic periodical publications).
The VAT rate is zero for:
- exports;
- Intra-Community supply;
- sea-going vessels and aircrafts used in international routes, equipment, spare parts and fuel used on such vessels or aircrafts and the repair, maintenance, chartering and hiring of or establishment of a usufruct of such vessels or aircrafts;
- goods and services supplied to passengers for consumption on board of vessels and aircrafts moving on international routes; the provision of port services to meet the direct needs of vessels navigating in international waters and the provision of navigation services and airport services to meet the direct needs of aircraft used mostly on international routes;
- goods transferred and transported to another Member State to a diplomatic representative, consular agent (except honorary consul), a representative or representation of a special mission or an international organisation or consular post of a foreign state, a special mission or Community institution or to Member State of NATO intended either for the use of the forces of other NATO Member States or of the civilian staff accompanying them, or for supplying their messes or canteens when such forces take part in the common defence effort;
non-Community goods placed in a free zone or free warehouse under customs procedures; - Community goods placed under tax warehousing arrangements.
The heavy goods vehicle tax is levied on trucks with maximum authorized weight or gross laden weight of not less than 12 tonnes and road trains composed of trucks and one or more trailers with a weight not less than 12 tonnes. Heavy goods vehicles of the Defence Forces, the Defence League, the Border Guard, the police, the state and local government, fire and rescue services are exempt from the tax. The heavy goods vehicle tax is based on EU Directive 1999/62 / EC. The requirements of this directive have been introduced into Estonian law by the Heavy Goods Vehicle Tax Act. Estonia has implemented the minimum mandatory tax rates set out in this Directive, which are set out in the Annex to the Heavy Goods Vehicle Tax Act. The tax rate depends on the extent to which the truck has an impact on the roads and is therefore affected by the registered weight of the heavy goods vehicle, the number of axles on the truck or road trains and the type of suspension of the truck.
In the case of the heavy goods vehicle tax, it is important to distinguish between the concepts of gross laden weight and registered weight. The gross laden weight indicates the maximum mass authorized by the manufacturer for the heavy goods vehicle or combination of vehicles, the registered weight indicates the maximum mass recorded with the actual use of the heavy goods vehicle or road train and may be less than the gross laden weight. Such specification shall be made in the register at the request of the taxpayer. In the traffic register, the basis for taxation is the registered mass, in the absence of such an entry, the gross laden weight is used. The mandatory particulars to be included in the Traffic Register for each vehicle are the gross laden weight, the number of axles, the type of suspension, an indication of the use of the vehicle (whether it is intended to carry goods) and the number of axles of trailers used simultaneously.
The tax is paid by natural persons temporarily or permanently residing in Estonia who own a heavy goods vehicle, legal persons registered here and state and local government agencies. The owner is generally responsible for paying the heavy goods vehicle tax. If the heavy goods vehicle is used on the basis of a usage agreement or an agreement with ownership reservation and the user is entered in the Traffic Register, the tax is paid by the user of the heavy goods vehicle.
The taxation period is a quarter and the tax is paid no later than the 15th day of the first month of the tax period into the bank account of the Tax and Customs Board. If the heavy goods vehicle has not been used during the entire taxation period, the heavy goods vehicle tax is paid in proportion to the time of registration in the register.
A natural person may open a special business account in a credit institution on the amounts received from the provision of services and sale of goods on which tax is paid on the basis of Simplified Business Income Tax Act. Accounting and tax reports are not required when using a business account because the tax liability is calculated on the basis of the payments to the business account and the business income tax is automatically withheld and transferred to the prepayment account. Business income tax is withheld at the rate 20% (22%, 24% or 26%1) and covers income tax, social tax and a contribution to a funded pension (if the person has joined the supplementary pension system). The period of taxation of business income tax is a calendar month.
A business account is useful for a person who provides services to other natural persons in the areas of activity that do not involve any direct expenses, or for a person who sells self-produced goods or handicraft goods or the goods with low costs of materials or acquisition. Upon providing services to a legal person, tax liability arises to the legal person according to the Income Tax Act as the payment for the service to the business account holder is regarded as non-deductible expense from business income. The owner of the business account cannot be a VAT payer or be acting as a self-employed person in the same or similar area of activity.
Tax Base
Payments received to the business account from providing services or selling goods, without a possibility to deduct expenses.
Tax Rates
Tax rate is 20% of the amount received on the business account if the amount does not exceed 40 000 euros in a calendar year;
If the amount received on the business account exceeds 40,000 euros per calendar year, the natural person is obligated to register as an entrepreneur (self- employed person or a company) in the Commercial Register and as a person liable to value added tax in the Estonian Tax and Customs Board.
Tax Allocation
The business income tax is divided into income tax, social tax and contribution to funded pension (if the person has joined the funded pension).
- Income tax part is 22/55 of the rate of the business income tax (20%);
- Social tax part is 33/55 of the rate of the business income tax (20%);
- If the taxpayer has joined the funded pension, the business income tax rate is higher by the funded pension contribution rate (2%, 4% or 6%). Contributions to funded pension is equal to the part added the rate to the business income tax.
Compulsory excise duties in the EU
Member States shall charge with excise duty:
1) alcohol,
2) tobacco products,
3) fuel,
4) electricity.
Named products are subject to the excise duty in Estonia on the bases of the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act. The EU legislation is complied with in the taxation of excise goods. The excise duty rates are in line with the minimum rates set for the EU Member States. Excise duty is paid generally by the excise warehousekeeper when products are produced and released for consumption in Estonia. Excise duty is paid by a registered consignee or another person upon receiving excise products from another Member State. An importer is a liable person to pay excise upon importation. In case of natural gas or electricity the excise duty is payable mainly by the operator of natural gas network or an electricity network. A tax liability arises from natural gas or electricity mainly when it is been transmitted to an end user.
A tax liability arises for a producer of heat from solid fuel (coal, lignite, coke and oil shale) on which excise duty has not been paid upon commencement of use of solid fuel for the production of heat.
Tax and Customs Board provides advice and information related to the excise duties. Important information, including excise duty rates, is published on the website of Tax and Customs Board.
Domestic excise duties
Packaging excise duty has been introduced in Estonia mainly for the purpose of environmental protection and its main task is to promote the recovery, recycling and reuse of packaging. Packaging excise duty is paid only by companies that have not joined recovery organizations or have provided false information. Part of the packaging of beverages is covered by a deposit system, which exempts beverage packaging from excise duty if at least 85% of each type of packaging material is recovered.
Related documents
Last updated: 22.04.2026
Social tax
Tax Base
Employers pay social tax on payments in cash and in kind made to natural persons. Sole proprietors pay tax on their business income. Employers and sole proprietors are both obliged to pay social tax not less than the amount calculated from the monthly rate provided for in § 2¹ of the Social Tax Act (in 2026, the minimum monthly basis for social tax is 886 euros). Sole proprietors also have an upper limit- the maximum basis for social tax is the amount calculated from ten-fold minimum wage (in 2026 the minimum wage is 946 euros per month and the maximum basis for social tax payable by sole proprietors is thus 10*12 months*946 euros).
The law enacts several special cases of paying social tax when the tax is paid by the state and the rural municipality or city, e.g. for persons receiving unemployment benefits or childcare allowances.
Tax Rates
Social tax rate is generally 33 per cent, in particular special cases 13 per cent of the taxable amount. Taxes are due monthly and the remittance of tax is made congruent with the remittance of withholding tax; the tax is paid by the 10th day of the following month. Taxable period for business income of sole proprietors is a calendar year, whereas quarterly advance payments of tax are due.
Tax Allocation
The social tax is personalized and the amounts paid will be taken into account when making pension payments. Tax accrues to the budget of state health insurance fund (13%) and pension insurance fund (20%; 16% + 4% in case of persons who have joined the second pillar of the pension insurance system).