Employer Tax Contributions

Tax Type	Rate	Base
Social Tax	33%	Gross salary (employer's expense)
Unemployment Insurance Premium (Employer)	0.8%	Gross earnings
Income Tax (Withheld)	22%	Gross salary (employee's tax)
Mandatory Funded Pension (Withheld)	2% (employee)	Gross salary (employee's contribution)

Filing & Compliance

• Submit Declaration of Income and Social Tax, Unemployment Insurance Premiums, and Contributions to Mandatory Funded Pension (TSD form) by the 10th day of the month following the payment.
• Remit all withheld amounts and employer contributions to the Estonian Tax and Customs Board by the 10th day of the month following the payment.
• Register new employees with the Estonian Employment Register before they start working.

In 2025, Estonia implemented several changes to its tax system affecting both individuals and businesses.

Income Tax

• Personal Income Tax: The personal income tax rate is 22%. The basic exemption remains at €654 per month (€7,848 annually), subject to income limitations, with higher exemptions for pensioners (€776 monthly/€9,312 annually). The previously planned increase of the universal basic exemption to €700 per month has been postponed to 2026.
• Corporate Income Tax: The corporate income tax rate is 22%. The preferential 14% rate for distributed profits has been abolished.
• Withholding Tax on Dividends: The 7% withholding tax applies only to dividends distributed from profits taxed at the previous 14% rate.
• Tax on Advance Payments by Credit Institutions: Increased to 18%.

Tax-Exempt Allowances and Deductions

• Daily Allowance for Business Travel: Increased to €75 for the first 15 days of travel within a month and €40 for subsequent days.
• Compensation for Use of Personal Vehicle: Increased to €0.50 per km, up to a maximum of €550 per month.
• Health and Sports Costs: Employers can deduct up to €400 per employee annually. Massage and other specific healthcare services are now included.
• Gifts to Employees: Tax-free up to €100 per occasion. Additional €100 tax-free for work anniversaries if the employee has worked for at least five years. Gifts to employees' children remain tax-free up to €100.

Other Tax Changes

• A temporary defense tax of 2% will be applied to personal income starting from January 1, 2026, until December 31, 2028, and is applicable to previously tax-exempt income like foreign dividends and pension payments. A similar defense tax of 2% on companies’ annual profits will be introduced starting from January 1, 2026.
• A new Motor Vehicle Tax was implemented in 2025.
• Excise duties have increased.

It is important to remember that these figures are based on information available as of February 5, 2025, and may be subject to change. Consulting official Estonian tax resources or a qualified tax advisor is recommended for the latest updates and specific situations.