Estonian tax rates have changed more in the past two years than in the previous decade. VAT went from 20% to 22% to 24%. A defense tax was legislated, then abolished before it took effect. The CIT and PIT rates were set to rise to 24%, then that increase was cancelled. The basic exemption formula was scrapped and replaced with a flat amount.
If you run an Estonian OÜ — especially as an e-resident — you need one reliable, up-to-date reference. This is it. Every rate below is confirmed for 2026 against EMTA, the Riigikogu legislative record, and leading Estonian tax firms.
The Master Rate Table
Here is every tax rate that applies to Estonian companies and their owners in 2026:
| Tax | Rate | Paid By | Notes |
|---|---|---|---|
| Corporate income tax (CIT) | 22/78 (~28.21% of net) | Company, on distributions | 0% on retained profits |
| Personal income tax (PIT) | 22% | Withheld from recipient | Flat rate, no brackets |
| Social tax | 33% | Employer, on top of gross | Min base EUR 886/month |
| Unemployment insurance (employee) | 1.6% | Withheld from employee | |
| Unemployment insurance (employer) | 0.8% | Employer | |
| Funded pension (II pillar) | 2%, 4%, or 6% | Withheld from employee | Voluntary contribution rate |
| VAT (standard) | 24% | Charged on sales | From 1 Jul 2025 |
| VAT (accommodation) | 13% | Charged on sales | From 1 Jan 2025 |
| VAT (reduced) | 9% | Charged on sales | Press, books, medicines |
| VAT (zero rate) | 0% | N/A | Exports, intra-EU supply |
Corporate Income Tax: 22/78
Estonia's CIT system is unique in the EU: retained and reinvested profits are taxed at 0%. Tax is triggered only when profits are distributed — as dividends, fringe benefits, non-business expenses, or other deemed distributions.
The rate is 22% of the gross distribution, which translates to 22/78 of the net amount (approximately 28.21%).
How the Calculation Works
To distribute EUR 1,000 net to a shareholder:
| Step | Calculation | Amount |
|---|---|---|
| Gross-up | 1,000 / 0.78 | EUR 1,282.05 |
| CIT (22%) | 1,282.05 x 0.22 | EUR 282.05 |
| Net to shareholder | EUR 1,000.00 | |
| Total company cost | EUR 1,282.05 |
CIT is declared on TSD Annex 7 and due by the 10th of the month following the distribution.
What About 24%?
Some sources — including EY and PwC publications from mid-2025 — still show a CIT increase to 24/76 from 2026. This is outdated. Here is what happened:
- June 2025: The Riigikogu legislated a permanent CIT increase to 24/76 (as a replacement for the abolished defense tax).
- December 2025: The Riigikogu adopted further amendments cancelling the 24/76 increase.
- 2026 reality: The rate remains 22/78. Confirmed by EMTA, Grant Thornton, and 1Office.
Reduced Rate (14/86): Abolished
The reduced 14/86 rate for regularly distributed dividends was abolished from 1 January 2025. Only the standard 22/78 rate applies.
There is a transitional rule: companies may still apply a tax exemption when further distributing dividends that were received before 31 December 2024 and originally taxed at the 14/86 rate, provided the distributing company held at least a 10% stake at the time of receipt.
Personal Income Tax: 22%
The PIT rate for 2026 is 22% — a flat rate with no progressive brackets.
Like CIT, some mid-2025 sources show a planned increase to 24%. This increase was legislated in June 2025 alongside the CIT increase, but both were reversed by the December 2025 amendments. The PIT rate remains 22%.
Basic Exemption: Flat EUR 700/Month
This is one of the most significant changes for 2026. The income-dependent "tax hump" has been abolished.
2025 system (abolished): The basic exemption decreased as income rose, from EUR 654/month at low incomes down to EUR 0 for monthly income above EUR 2,100. This created complex payroll calculations and a marginal tax rate bump in the phase-out range.
2026 system: A flat EUR 700/month (EUR 8,400/year) basic exemption applies regardless of income level. Pensioners at pensionable age receive EUR 776/month (EUR 9,312/year).
For payroll purposes, the employee can request the basic exemption be applied by their employer. If they have multiple income sources, they choose which employer applies it.
Social Tax: 33%
Social tax is paid by the employer on top of gross compensation. It funds health insurance and the state pension.
The rate is 33% — split as 20% for pension insurance and 13% for health insurance.
Minimum Social Tax Base
| Year | Monthly Minimum Base | Monthly Minimum Social Tax |
|---|---|---|
| 2025 | EUR 820 | EUR 270.60 |
| 2026 | EUR 886 | EUR 292.38 |
If your company pays any compensation in a given month — even EUR 100 — social tax must be paid on at least EUR 886. That means a minimum of EUR 292.38 in social tax, regardless of the actual payment amount.
Exemptions from the Minimum
The minimum social tax obligation does not apply if the recipient is:
- Receiving a pension
- A student
- On parental leave
- Working part-time alongside another job where the minimum is already covered
- A non-resident holding an A1 certificate from an EEA country or Switzerland
The A1 exemption is particularly relevant for e-residents. If you live in an EEA country and hold an A1 certificate proving social insurance coverage in your home country, your Estonian company does not pay Estonian social tax on your compensation.
VAT: 24% Standard Rate
The standard VAT rate increased to 24% on 1 July 2025. This is the rate that applies to most goods and services.
| Category | Rate | Examples |
|---|---|---|
| Standard | 24% | Most goods and services |
| Accommodation | 13% | Hotels, guesthouses |
| Reduced | 9% | Press, periodicals, books, medicines |
| Zero | 0% | Exports, intra-EU supply of goods |
| Exempt | N/A | Financial services, education, healthcare, residential rental |
Registration Threshold
VAT registration becomes mandatory when taxable turnover exceeds EUR 40,000 per calendar year. Registration must happen within 3 business days of exceeding the threshold.
Non-resident businesses providing taxable supplies in Estonia must register regardless of turnover.
Filing
The VAT return (KMD) is filed monthly via e-MTA by the 20th of the following month, along with the KMD INF invoice-level annex.
Unemployment Insurance: 1.6% + 0.8%
| Component | Rate | Paid By |
|---|---|---|
| Employee contribution | 1.6% | Withheld from gross |
| Employer contribution | 0.8% | Employer, on top of gross |
Unemployment insurance applies to employees. It may not apply to board members — this depends on the nature of the relationship.
Worked Example: Total Cost of a EUR 1,000 Board Member Fee
Here is the complete tax calculation for paying a EUR 1,000 gross board member fee to an Estonian resident board member in 2026, assuming the basic exemption is applied:
| Component | Calculation | Amount |
|---|---|---|
| Gross fee | EUR 1,000.00 | |
| Basic exemption | Applied monthly | -EUR 700.00 |
| Taxable amount | 1,000 - 700 | EUR 300.00 |
| PIT (22% of taxable) | 300 x 0.22 | EUR 66.00 |
| Funded pension (2%) | 1,000 x 0.02 | EUR 20.00 |
| Net to board member | 1,000 - 66 - 20 | EUR 914.00 |
| Social tax (33%) | 1,000 x 0.33 | EUR 330.00 |
| Total company cost | 1,000 + 330 | EUR 1,330.00 |
Without the basic exemption (e.g., it is applied at another employer, or the recipient is a non-resident):
| Component | Calculation | Amount |
|---|---|---|
| Gross fee | EUR 1,000.00 | |
| PIT (22%) | 1,000 x 0.22 | EUR 220.00 |
| Funded pension (2%) | 1,000 x 0.02 | EUR 20.00 |
| Net to board member | 1,000 - 220 - 20 | EUR 760.00 |
| Social tax (33%) | 1,000 x 0.33 | EUR 330.00 |
| Total company cost | 1,000 + 330 | EUR 1,330.00 |
The total company cost is the same in both cases — EUR 1,330. The basic exemption only affects how much the recipient takes home versus how much goes to income tax.
Note: the minimum social tax base for 2026 is EUR 886. Since EUR 1,000 exceeds this, no top-up is needed. For fees below EUR 886, the company would still pay EUR 292.38 in social tax.
Timeline of Recent Changes
| Date | What Changed |
|---|---|
| 1 Jan 2024 | VAT standard rate: 20% to 22% |
| 1 Jan 2025 | CIT rate: 20/80 to 22/78 |
| 1 Jan 2025 | Reduced CIT rate (14/86): abolished |
| 1 Jan 2025 | VAT on accommodation: 9% to 13% |
| 1 Jan 2025 | VAT on press publications: 5% to 9% |
| 19 Jun 2025 | Defense tax: abolished by Riigikogu before taking effect |
| 1 Jul 2025 | VAT standard rate: 22% to 24% |
| Dec 2025 | CIT and PIT increases to 24%: cancelled by Riigikogu |
| 1 Jan 2026 | Basic exemption: flat EUR 700/month (income-dependent phase-out abolished) |
| 1 Jan 2026 | Minimum social tax base: EUR 820 to EUR 886/month |
| 1 Jan 2026 | Minimum wage: EUR 820 to EUR 900/month |
| 1 Feb 2026 | Estonia joins EU cross-border telework agreement (49% threshold) |
The Defense Tax: What Happened
You may have read about a planned Estonian defense tax (kaitsemaks) that was supposed to include a 2% corporate profit tax, 2% additional PIT, and 2% additional VAT for 2026-2028.
The Riigikogu abolished the Defense Tax Act on 19 June 2025 before it ever took effect. It was published in Riigi Teataja on 8 July 2025 as no longer in force.
Instead, the government opted for permanent rate increases (CIT and PIT to 24%, VAT to 24%). The VAT increase to 24% went ahead on 1 July 2025. But the CIT and PIT increases were subsequently cancelled in December 2025.
The net result: no defense tax exists, and the only permanent rate change that survived is the VAT increase to 24%.
How Arvello Helps
Arvello's tax calculations are updated for all 2026 rates — the 22/78 CIT rate, the flat EUR 700 basic exemption, the EUR 886 minimum social tax base, and the 24% standard VAT rate. Every payroll run, dividend distribution, and VAT return uses the correct rate for the payment date.
The tax rates dashboard shows your current rates at a glance, and the Pay Yourself feature calculates the total company cost for any compensation scenario.
