Approval of Tax Increases in Estonia
The Parliament of Estonia (Riigikogu – State Assembly) approved the increase in the rates of two major taxes – Value Added Tax (VAT) and Corporate Income Tax/Personal Income Tax (CIT/PIT) in mid-June 2023. The corresponding legislative bills, containing the agreed-upon amendments, now await the signature of the country’s President, Alar Karis. The coalition agreement, signed by the country’s Prime Minister, Kaja Kallas, and representatives of the parties forming the coalition government, serves as the foundational document that incorporates these amendments. The agreement is valid from 2023 to 2027, with tax regulations being an essential component of the agreement.
Law No. 147 SE (Value Added Tax):
- The law will come into effect on January 1, 2024.
- The standard VAT rate will increase to 22% (previously 20%).
- The rate for service providers will be 13% starting from January 1, 2025 (previously 9%). The initial draft of the amendments proposed the elimination of this concession.
- The reduced 5% rate for certain print media publications has been repealed, and these publications will now be subject to a VAT rate of 9%.
Law on Income Tax and Defense Service No. 148 SE:
- The CIT and PIT rates will increase to 22% from January 1, 2025 (previously 20% for both taxes).
- The proportion of advance income tax payment will increase from 14% to 18% starting from January 1, 2025, applicable only to credit institutions resident in Estonia and branches of similar foreign structures operating in the country.
- The minimum taxable income (CIT only) will be raised to 8400 EUR per year (previously 7848 EUR).
Tax Overview in Estonia (as of July 2, 2023, potential changes not considered, source – PWC):
- Corporate Tax: 20%, possibility of tax refund by the 10th of the following month.
- Personal Income Tax (PIT): 20%, possibility of tax refund by April 30, final payment by October 1.
- VAT: 20%.
- Withholding Tax: 0% to 20%.
- Capital Gains Tax: Based on the regular PIT rate.
- No taxes on net property, inheritance, or gifts.