Unlike Lithuania, where the CIT rate increased from 5% to 6% (for small businesses) and from 15% to 16% for others, there are many more changes in Taxes in Estonia. What exactly has changed there?

Income tax

  • CIT and PIT rates increased from 20% to 22%;
  • The 14% CIT rate (+7% PIT if the recipient is a natural person) for regularly paid profits has been abolished;
  • The CIT payable in advance by credit institutions has been increased from 14% to 18%.
  • In the automatic account mode (similar principle to our economic activity income account system), the 2nd pillar pension fund rate (2% or 4% or 6% for volunteers) is added to 20% PIT rate. In Estonia this system works for Estonian tax residents – self-employed people with an annual turnover of up to EUR 25k. It cannot be used in sectors that require a license (finance, lawyers, etc.).

VAT

  • The VAT rate for hotel (including Airbnb, Booking) services has been increased from 9% to 13%. The reduced 5% rate for the media is abolished and 9% rate is applied instead. Thus, in Estonia, reduced VAT rates apply to a very limited range:
    • 9% – for books, media, medicines;
    • 13% – for hotels.
  • A definition of unused real estate has been introduced. Until now, it became used on the first day of use of the property. The VAT Directive provides that countries may define real estate unused, if it has been used for up to 2 years. In Estonia, this period will now be 1 year.

Car tax introduced

Car tax is payable in 2 parts: both upon car registration and as an annual payment for all cars registered in Estonia. It is determined annually, depending on the weight of the car and the amount of CO2 emissions.

Read the full story by tax expert Jānis Taukačs here.