Law Changes 2025

Minimum wage

From 01.01.2025, the minimum wage increases to EUR 886 per month (EUR 820 in 2024, EUR 725 in 2023, EUR 654 in 2022).

See how payroll calculations will look in 2025 using the Salary Calculator .

Tax-free income threshold

In 2025, the tax-free minimum for resident natural persons remains the same, i.e., EUR 654 per calendar month (EUR 7,848 per year, except EUR 9,312 for those at retirement age). The "tax cliff" also remains in effect with the same formula: 654 − 654 ÷ 900 × (payment - 1200).

Social tax minimum

The social tax minimum in 2025 is EUR 270.60 (33% of the previous year's minimum wage, i.e., EUR 820 × 33%). This is the amount that must be paid monthly for employees under employment contracts, and for other contracts, it is the minimum amount that must be paid for the employee to have valid health insurance.

Income tax rate increase

From 01.01.2025, the income tax rate increases to 22% (20% until 31.12.2024).

Corporate income tax rate increase

From 01.01.2025, the corporate income tax rate increases to 22/78 (20/80 until 31.12.2024).

For example, if EUR 1,000 is paid as net dividends to an individual owner's bank account (at the standard rate) until 31.12.2024, the total tax cost is EUR 250. From 01.01.2025, this becomes EUR 282.05 (tax liability increases by 12.82%).

Lower dividend tax rate abolished

The lower dividend tax rate of 14/86 and the 7% income tax withholding on dividends paid to natural persons are abolished. Thus, from 2025, dividends are taxed only at the 22/78 rate.

Car tax

The car tax consists of two components: registration fee and annual tax.

Both can be calculated using the following calculator .

The motor vehicle tax is a national tax paid by all owners or responsible users of motor vehicles registered in the traffic register. The motor vehicle tax is collected by the Tax and Customs Board according to issued tax notices. These notices will be sent by EMTA no later than 15.02.2025. Tax payment deadlines are 15.06 and 15.12.

The registration fee is paid before registering passenger cars and vans in the traffic register. The registration fee must also be paid on the first change of ownership of vehicles already registered in the Estonian traffic register, provided that no registration fee has been previously paid for that vehicle.

Audit and review thresholds increase

Audit and review thresholds increase by 25% from 01.01.2025. Since this is a positive change for companies (fewer companies will be subject to audit and review), it applies retroactively, starting from the 2024 annual reports.

Company size classifiers increase

A micro enterprise is an accounting entity whose two of the reporting date indicators do not exceed the above figures. A small enterprise is an accounting entity that is not a micro enterprise and whose two of the reporting date indicators do not exceed the above figures. The same applies to medium-sized enterprises.

A large enterprise is an accounting entity that is not a micro enterprise, small enterprise, or medium-sized enterprise.

Right to request e-invoices

Since 2019, submitting e-invoices to the public sector has been mandatory, and now the private sector is gradually following. From 01.07.2025, all accounting entities registered as e-invoice recipients in the business register have the right to request invoices in e-invoice format from suppliers. This means that not all sales invoices need to be sent automatically as e-invoices, but if a client requests it, the supplier must comply.

Reduced VAT rates change

From 01.01.2025, the following VAT rates change:

• Accommodation and accommodation with breakfast will be taxed at 13% VAT, previously 9%;
• The VAT rate for press publications will be 9%, previously 5%.

Option to change funded pension contribution rate

From 01.01.2025, individuals who have joined the II pillar can increase their funded pension contribution rate from 2% to 4% or 6%. To make changes, a corresponding application must be submitted to the pension register administrator or account manager between 01.01.2024 and 30.11.2024. The new rate takes effect from 01.01.2025. If the employee has multiple employers, the new rate applies to all employers. The state's contribution of 4% does not change.

Excise duties

VAT rate change

From 01.07.2025, VAT increases again and Estonia's new standard VAT rate will be 24% (instead of the current 22%). The previous VAT transitional provisions, which were originally supposed to be valid until 31.12.2025, will end on 30.06.2025.

VAT on virtual events

Previously, for virtually transmitted events (such as training sessions), the rule was that if the training is conducted by a trainer, VAT of the physical location of the event is added to such a service. And if the event is fully automated (such as a pre-recorded training that can be purchased and listened to at a convenient time), VAT is based on the location of the service recipient. From 01.01.2025, in both cases, the location of the service recipient will be the basis for VAT.

VAT on sale of new or substantially improved buildings

Previously, the rule was that when selling a new building that has already been put into use, VAT does not need to be added. From 01.01.2025, VAT must also be added when a new or substantially improved building has been put into use. An important condition is that this sale takes place within one year after being put into use (rental period must be at least 12 months) and it is the first transfer. After one year, VAT does not need to be added.

Fixed asset input VAT adjustment

Until the 01.01.2025 law change, fixed asset input VAT had to be adjusted at the end of each calendar year (if the fixed asset is not 100% used for taxable turnover). Under the new rule, this must be done in full upon initial use. Later, it is adjusted over 5/10 years according to actual use.

This applies only to fixed assets put into use from 01.01.2025.

VAT registration rule change

From 01.01.2025, the turnover of financial and insurance services is also included in the VAT registration threshold. This applies if the services are not of an incidental nature.

On the other hand, transactions that are taxable at 0% in Estonia and whose turnover arises abroad do not need to be taken into account.

Small business VAT special scheme

This change comes from an EU directive and aims to reduce the administrative burden on small businesses. Currently, in many EU member states, the rule is that VAT registration is required from the first euro, as the local registration threshold does not apply to companies from other countries. This is now changing.

Companies whose annual turnover in the European Union does not exceed EUR 100,000 can apply the small business special scheme. This applies to both the current and the previous year.

The special scheme does not apply automatically; an application must be submitted indicating in which member states the company wishes to operate. However, this decision is not made by the local tax authority, as it asks each member state for separate permission to grant the special scheme to the company. After receiving permits and thus applying the special scheme, the turnover must be declared but not taxed. This allows tax authorities to monitor threshold compliance. If the local VAT registration threshold is reached in any member state, the right to use the special scheme is lost in that country, and the company must register directly as a VAT payer in that country.

A company wishing to apply the small business VAT special scheme does not need to be a VAT payer in its home country (Estonia).

It is very important to note that applying this special scheme comes with a limitation on input VAT deduction - there is no right to deduct input VAT on services and goods acquired for turnover arising through this special scheme.

Users of this special scheme cannot use reverse charge either, and there is no obligation to register as a limited VAT payer. So that third parties know that a company has joined the small business VAT special scheme, the VAT code logic changes and "EX" is added to the end of the code.

Tax-free expense thresholds change

From 01.01.2025, the following tax-free expense thresholds change: