🇪🇪 Tax19 Jun 2025
Estonia scraps its planned security tax and legislates a 24% income tax rate from 2026
Estonia's Parliament voted on 19 June 2025 to repeal the security tax that would have added 2% on company profits from 2026, and to raise the income tax rate from 22% to 24% from 2026 instead, including the tax on distributed profits. The law was published on 8 July 2025. Estonia keeps its system of taxing companies only when they distribute profits.
The Security Tax Act of December 2024 would have charged a temporary 2% tax on company profits, and extra taxes on individuals and VAT, from 2026 to 2028 to fund defence.
What changed
- The security tax was repealed before it started.
- The income tax rate, which also applies to distributed company profits, was to rise from 22% (22/78 of the net distribution) to 24% (24/76) from 2026. Distributions in 2025 stayed at the old rate.
- Estonia's model of taxing a company only when it distributes profits continues. The reduced 14/86 rate for regular dividends had already ended on 1 January 2025.
Later developments
In December 2025 Parliament cancelled the rise to 24%, so the rate stays at 22% in 2026. See our coverage.
Who is affected
Estonian companies planning dividends, and groups with Estonian holding companies.