2025 brought Estonia the largest set of tax changes in years, touching taxation, investment rules, intra-EU trade and invoicing. Some of the changes were announced, legislated and then withdrawn before they ever applied — which is why a clear picture of what actually took effect is worth having.
This article sets out the changes that came into force during 2025, what each one meant in practice for a company, and which widely reported measures were cancelled along the way.
In short
From 1 January 2025 the income tax rate rose to 22% and the reduced dividend rate was abolished; from 1 July 2025 the standard VAT rate rose to 24%. The investment account regime was widened to cover crypto-assets and crowdfunding, land tax ceilings doubled, and the EU small business scheme opened cross-border trade up to €100,000 without local VAT registration. The separate security tax planned for 2026–2028 was abolished before it took effect.
Tax Rate Changes That Took Effect in 2025
The rate changes affected almost every business, though on two different dates: the income tax and reduced-rate VAT changes applied from 1 January, the standard VAT increase from 1 July.
| Change | Before | From 2025 | Effective |
|---|---|---|---|
| Personal income tax | 20% | 22% | 1 January 2025 |
| Corporate income tax on distributed profit | 20% (20/80) | 22% (22/78) | 1 January 2025 |
| Reduced dividend rate (14/86) | Available | Abolished | 1 January 2025 |
| Standard VAT rate | 22% | 24% | 1 July 2025 |
| VAT on accommodation services | 9% | 13% | 1 January 2025 |
| VAT on periodicals (print and electronic) | 5% | 9% | 1 January 2025 |
| Land tax ceiling — residential and agricultural land | 0.5% | 1% | 1 January 2025 |
| Land tax ceiling — other land | 1% | 2% | 1 January 2025 |
Two points are easy to misread here. The land tax figures are maximum rates: the actual rate is set by each local authority, and several — Tallinn among them — kept their existing rates rather than moving to the new ceiling. And the abolition of the 14/86 reduced dividend rate also ended the 7% withholding tax on such dividends going forward, although the withholding still applies to distributions that had been taxed at the reduced rate earlier.
The core of the Estonian system was untouched: retained and reinvested profit remains untaxed, and corporate income tax still arises only on distribution.
The Security Tax: Legislated, Then Withdrawn
The most widely reported measure of the period never applied. The security tax (julgeolekumaks) was designed as a three-part package: the VAT increase, a two-point rise in personal income tax, and — the part that alarmed businesses most — a 2% tax on the accounting profit of companies, which would have broken with Estonia’s principle of taxing profit only when distributed.
On 19 June 2025 the Riigikogu abolished the temporary security tax planned for 2026–2028. The VAT increase was kept and made permanent instead, and the plan at that point was to raise both corporate and personal income tax to 24% from 2026. That increase was itself repealed in December 2025, leaving the rate at 22%.
Why this still matters
A great deal of advisory content, payroll documentation and planning material published during 2025 assumed a 24% rate from 2026 or a 2% tax on company profits. Neither took effect. If your tax planning or software settings were prepared during that period, they are worth re-checking against the rates that actually apply.
Wider Scope for the Investment Account
The investment account regime, which lets a resident individual defer income tax until money is withdrawn from the account, was significantly broadened. The list of permitted financial assets was extended to include covered bonds, instruments issued through regulated crowdfunding platforms and crypto-assets, while units of unlicensed small funds were removed from it.
Crypto-assets qualify from the tax period beginning 1 January 2025, provided they were acquired through a crypto-asset service provider or issuer authorised under MiCA. Accounts may now also be held with investment firms, payment institutions and e-money institutions anywhere in the EEA, not only with credit institutions. Outside the investment account, losses from invalidated property rights — devalued crypto-assets or uncollectible crowdfunding loans — became deductible from taxable income.
Taken together, these amendments move the taxation of private investors closer to how investing through a company already works, which is a point worth weighing when deciding whether to hold an investment portfolio personally or through an Estonian company.
Simpler Cross-Border Trade for Small Businesses
From 1 January 2025 the EU small business scheme allowed SMEs to trade in other member states without registering for VAT locally, up to a Union-wide turnover of €100,000, subject to the threshold in each destination country. For a small Estonian company selling into several EU markets, this removed a real barrier to entry — though it comes with its own reporting obligations, since eligibility has to be monitored and declared.
Electronic Invoicing
From 1 July 2025 a buyer registered in the Commercial Register as an e-invoice recipient can require its suppliers to issue invoices in machine-readable form. In practice this pushes document flows towards automation: less manual entry, faster processing and fewer disputes over what was sent and when. Companies that had not yet moved to structured invoicing needed to check whether their accounting software supported it.
What This Meant for Businesses
The year cut both ways. Higher VAT and income tax rates squeezed margins and made pricing and distribution decisions more consequential, particularly for companies that had planned dividend payments around the old reduced rate. At the same time, the widened investment account regime and the EU small business scheme opened up options that had not existed before.
The practical lesson of 2025, though, is about volatility rather than any single rate. Measures were announced, passed and repealed within months of each other, and companies that rebuilt their planning around each announcement spent effort on scenarios that never arrived. Decisions anchored in what is actually in force — and reviewed when it changes — held up better.
How Eesti Firma Can Help
We work with the consequences of these changes daily, across company structures of every size.
- Tax planning: reviewing distribution timing, salary and dividend mix, and VAT position against the rates currently in force.
- Accounting and reporting: ongoing bookkeeping and tax filings, including e-invoicing setup and VAT registration in Estonia and abroad.
- Cross-border trade: assessing whether the EU small business scheme fits your sales pattern, and handling the reporting it requires.
- Investment structures: comparing personal and corporate holding of an investment or crypto-asset portfolio.
- Legal support: corporate and contract work arising from changes to the rules.
Talk to Us
If you are unsure which of the 2025 changes actually affect your company — or whether your planning still rests on a measure that was later withdrawn — send us a request and we will go through your situation and set out the options.
