Starting January 1, 2025, Estonia will implement several updates to its tax legislation. These changes will affect both individuals and businesses, impacting various sectors of the economy. This article will provide an overview of the key changes expected in 2025 and their potential implications for citizens and businesses.
Changes to VAT Rates
As part of the VAT reform, the following adjustments will take place in 2025:
- VAT on Accommodation Services
The VAT rate for accommodation services, such as hotels and hostels, including bed-and-breakfast services, will increase from 9% to 13%. This change applies to all organizations offering temporary lodging services. The adjustment is intended to align the tax rate with broader European practices and may encourage the development of more efficient and competitive business models in the tourism sector. - VAT on Periodicals
The VAT rate on printed and electronic publications will rise from 5% to 9%. This affects newspapers, magazines, and their digital versions. The higher rate could foster the growth of modern information delivery formats, such as digital subscriptions and hybrid models.
Changes to Income Tax Rates
From January 1, 2025, income tax rates for both individuals and businesses will see an increase:
- Personal Income Tax
The personal income tax rate will increase from 20% to 22%. This change aims to strengthen the tax system and generate additional revenue for the state budget to support socially significant projects. - Corporate Income Tax
The corporate income tax rate will also change to 22/78 instead of the previous 20/80. This adjustment will increase the business sector’s contribution to the tax system, helping to distribute the tax burden more evenly across different parts of the economy. - Advance Payments by Credit Institutions
The tax on advance payments made by credit institutions will rise from 14% to 18%. This change is designed to support financial stability and promote the development of Estonia's banking system.
Abolition of the Reduced Dividend Tax Rate
From 2025, the reduced dividend tax rate (14/86) will be abolished. Going forward, all dividends will be taxed at the unified rate of 22/78. This simplifies the tax system, making it more transparent and predictable for both businesses and shareholders.
Conclusion
The tax changes taking effect from January 1, 2025, aim to adapt Estonia's taxation system to the current needs of its economy. These adjustments cover a range of areas—from VAT on accommodation services to income taxes for individuals and businesses. The reforms are intended to strengthen the national budget and promote economic growth, creating a stable foundation for the development of public programs and maintaining Estonia’s competitiveness in the global economy.