Estonia's standard VAT rate has been 24% since 1 July 2025, and the Riigikogu made that increase permanent. The 2% security tax and the planned rise of income tax to 24% from 1 January 2026 were both cancelled, so the estonia tax changes 2026 that actually apply to a company are fewer than many articles suggest. As of 4 November 2026, corporate income tax is still 22/78 on distributed profits, personal income tax is 22%, and the main new feature for individuals is a flat basic exemption of 700 euros per month.
This article sorts the measures into in force, cancelled and still open, using the Tax and Customs Board (EMTA), the Riigikogu, the Government and the Ministry of Finance as sources. It also covers board fees and the minimum social tax base, where blog posts contradict each other, and what has been announced for 2027.
Estonia Tax 2026 at a Glance: Which Measures Apply?
The table lists each measure with its legal status as of today.
| Measure | Status | Applies from |
|---|---|---|
| Standard VAT rate 24% (previously 22%) | In force, permanent | 1 July 2025 |
| 2% security tax (Security Tax Act) | Repealed before it applied | Never applied |
| Personal income tax 24% | Cancelled, rate stays 22% | Would have been 1 Jan 2026 |
| Corporate income tax 22/78 on distributed profits | In force | 1 Jan 2025 (regular dividends) |
| Flat basic exemption of 700 euros per month | In force | 1 Jan 2026 |
| Entrepreneur account rate 22% | Cancelled, rate stays 20% | Would have been 1 Jan 2026 |
Two repeals sit behind this table. Act 645 SE, passed by the Riigikogu on 18 June 2025, repealed the Security Tax Act and made the VAT increase permanent, and it also raised the personal income tax rate to 24% from 2026. Act 734 SE, passed on 3 December 2025, then repealed those income tax increases before they entered into force, and EMTA confirmed on 18 December 2025 that the rate stays at 22%.
Is the Estonia VAT Rate of 24% Permanent?
Estonia VAT 24% rate and start date
EMTA states that from 1 July 2025 the standard VAT rate is 24%, with reduced rates of 13% and 9% and a 0% rate for supplies such as exports. The increase was first presented as a three-year measure, but Act 645 SE removed the end date, so it has no expiry in the law as passed.
Which rate applies to invoices
The rate follows the time of supply. A company that invoiced a service in June 2025 and delivered it in July 2025 had to look at when the supply was actually made, and EMTA publishes worked examples for these cases. Prepayments received before 1 July 2025 were handled under the 22% rate for the part paid in advance.
Registration threshold
The registration threshold in Estonia is 40,000 euros of taxable turnover per calendar year, according to the Ministry of Finance. A company that exceeds it must register for VAT, and one that supplies to EU customers often registers earlier for practical reasons. The details are in our guide to Estonia VAT registration in 2026.
What Happened to the Estonia Security Tax?
What the security tax was meant to be
The Security Tax Act was passed in December 2024 to fund defense spending. It was planned to run from 2026 to 2028 and to add a 2% levy on corporate profits and on personal income from the first euro, alongside the VAT increase. A founder who read the plan in 2025 would have expected profits to be taxed as they arose, instead of only when distributed.
Why the estonia security tax cancelled decision was made
The Government dropped the tax in spring 2025, and the Riigikogu repealed the act with Act 645 SE in June 2025. The explanatory material linked the repeal to the higher income tax rates and the permanent VAT increase, and the Ministry of Finance had estimated IT development costs of 950,000 euros in 2025 for the Tax and Customs Board to implement the tax. No company ever paid the security tax, because the law was repealed before its first application date.
The 2% turnover claim
Some blogs describe the security tax as a 2% tax on turnover. The sources I found describe a levy on profits and income, and none of them describes a turnover tax, so a statement that a 2% turnover tax exists or existed should be treated as unsupported. The only Estonian tax that applies to turnover is VAT.
Corporate and Personal Income Tax Rates in 2026
Corporate income tax on distributed profits
Corporate income tax is 22/78 of the net amount distributed, and EMTA confirms that since 1 January 2025 the lower 14/86 rate for regular dividends no longer exists. A company that keeps profit inside the business and does not distribute it pays no corporate income tax on that profit. For example, an OÜ that earns 100,000 euros and distributes 50,000 euros of net dividend pays 14,102.56 euros of corporate income tax on the distribution and leaves 50,000 euros of profit untouched. The mechanics are covered in Estonia corporate tax explained.
Personal income tax and the basic exemption
Personal income tax is 22% on the gross principle, and every resident taxpayer receives a basic exemption of up to 8,400 euros per year (700 euros per month) from 1 January 2026, regardless of income. People of pensionable age keep 776 euros per month. The employee has to request the exemption from one employer, which matters for founders who pay themselves a salary.
What the planned 24% would have changed
The 24% personal rate and a 22% entrepreneur account rate were scheduled by Act 645 SE, and Act 734 SE removed both. EMTA's December 2025 notice confirms 22% for income tax and 20% for the entrepreneur account in 2026. Some accounting blogs and one consultancy alert still describe a 24% rate or a corporate tax calculation based on a 0.76 divisor from 2026, and these were written before the December repeal.
Board Fees, Social Tax and Payroll in 2026
Board fee tax rates
EMTA's guidance for companies with e-resident board members states that the company withholds 22% income tax on a board fee and pays 33% social tax on it. For a fee of 100 euros per month the company's cost is 133 euros and the board member receives 78 euros. Social tax is not due only where the recipient holds a valid A1 certificate from the home country.
Minimum social tax base
The monthly rate on which the minimum social tax liability is based is 886 euros in 2026, which gives a minimum of 292.38 euros of social tax per month. The minimum wage has been 946 euros per month since 1 April 2026. Whether the 886-euro minimum applies to a board fee as such is not stated on the EMTA pages I found, and secondary sources disagree, so a founder should confirm it with the accountant or EMTA, especially where health insurance coverage depends on the declared amount.
The 2% board fee surcharge claim
Two secondary sites report an additional 2% personal income tax on board fees from January 2026. I found no trace of it in EMTA guidance or in the Riigikogu acts, and EMTA's current rates are 22% income tax and 33% social tax. The only 2% in the EMTA rate table is the default funded pension contribution, which applies to people in the second pension pillar and not to board fees.
What Has Been Announced for 2027?
State budget and rates
The Government approved the draft 2027 state budget on 28 September 2026 and sent it to the Riigikogu the next day, according to the Ministry of Finance's October 2026 Draft Budgetary Plan. In the sections I read, the plan does not raise the VAT, income tax or corporate income tax rates. It keeps the basic exemption for working-age people at 700 euros without indexation to inflation, which in practice raises tax revenue each year.
Items still open
The same plan mentions a change to the Funded Pensions Act that shortens the waiting period for rejoining the second pension pillar from ten to five years, and it refers to a one-year pause of planned fuel, gas and electricity excise increases. The Riigikogu has not yet passed the 2027 budget, and a further tax proposal in the autumn session would be visible in the Riigikogu bill register. A founder planning dividends for 2027 should check that register again in December.
FAQ on Estonia Tax in 2026
Is Estonia's corporate tax rate going up in 2026?
No rate increase applies in 2026. Corporate income tax remains 22/78 on distributed profits, and the planned changes to the entrepreneur account rate were cancelled by Act 734 SE.
Does an e-resident OÜ pay the security tax?
No company pays it. The Security Tax Act was repealed by the Riigikogu in June 2025, before the first application date, and it has not been reintroduced in any bill I could find.
Which changes matter for a company with a foreign owner?
The 24% VAT rate affects pricing and invoicing for sales to Estonian customers, and the 22% board fee withholding with 33% social tax affects what a board fee costs. The e-resident side is covered in e-Residency changes in 2026, and the reporting duties that come with a company are in Estonia company requirements.
Final Thoughts
For 2026 a company in Estonia deals with a 24% standard VAT rate, a 22/78 corporate income tax on distributions, 22% personal income tax and a 700-euro monthly basic exemption. The security tax and the 24% income tax rate were repealed, so invoices, dividend plans and payroll budgets should use the current rates, and the minimum social tax base of 886 euros per month should be checked for any board fee arrangement. Before distributing profit at the end of 2026, it is worth checking the Riigikogu bill register for any 2027 amendments.
Inter Lawyers can help you check the tax position of an Estonian company, set up payroll and board fee arrangements, and prepare a distribution plan for 2027.