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Income Tax in Estonia - 2026

Personal Income Tax Rate (Tulumaks)

As of January 1, 2026, the personal income tax rate in Estonia is 24% (flat rate). This rate applies equally to all income levels and is calculated on a cash basis.

Basic Tax-Free Allowance (2026)

From January 1, 2026, the tax system was reformed with a major change: the "tax wedge" (Maksuküür) system was completely abolished. Now all residents have a uniform basic allowance of €700 per month (€8,400 per year), regardless of income level.

For retirees: Basic allowance is €776 per month (€9,312 per year), automatically applied by the social insurance fund.

Salary and Wage Taxation

Employer must withhold tax before salary payment

Payment deadline: 10th of the following month

Employee unemployment insurance: 1.6% (withheld by employer)

Employer unemployment insurance: 0.8% (business expense)

Social tax (Sotsiaalmaks): 33% (paid entirely by employer, covers state health insurance and pension fund)

Minimum 2026 basis for social tax calculation: €886/month

Pension Fund Contributions

Second-tier pension fund (optional)

Contribution rates: 2%, 4%, or 6% of gross salary

Minimum Wage 2026

Monthly: €886 (gross)

Hourly: €5.31

Mandatory for all employers

Value Added Tax (VAT)

Standard rate: 24% (since July 1, 2025)

Reduced rate 13%: Accommodation services

Reduced rate 9%: Books, medicines, medical equipment

Zero rate: Exports and international services

Corporate Income Tax

Estonia has a unique tax system:

Companies don't pay tax on unrealized profits

Tax only applies when profits are distributed (dividend payments)

Corporate tax rate: 24% (from 2026, up from 22%)

Tax base: Net profit divided by 0.76

Example: To distribute €76,000 net profit, the tax base is €100,000 and tax is €24,000.

Annual Tax Return Deductions

Tax return filing opens February 15, 2027 for 2026 income.

Deductible items:

Housing loan interest

Education expenses (for self, children, grandchildren, siblings under 26)

Charitable donations

Optional pension fund contributions (tier 3) up to 15% of income or max €6,000/year

Total deduction limit: €1,200 per year, cannot exceed 50% of taxable income

Additional allowances:

Enhanced spouse allowance (if spouse's annual income under €2,160)

Child support allowance (€1,848 for second child, €3,048 from third child onward)

Tax-Free Employee Benefits

Employer-paid health and wellness expenses: up to €400/year per employee

Personal Tax System

Estonia's tax system is fully digital through e-MTA:

EMTA automatically receives income data from employers

Tax return is pre-filled automatically

Basic allowance of €8,400/year is applied automatically

Key Tax Rates Summary 2026

| Tax Type | Rate |

|----------|------|

| Personal income tax | 24% |

| Employer social tax | 33% |

| Employee unemployment insurance | 1.6% |

| Employer unemployment insurance | 0.8% |

| Corporate tax | 24% (on dividend distribution only) |

| Standard VAT | 24% |

| Basic tax-free allowance | €700/month |

| Minimum wage | €886/month |

Source: [Estonian Tax and Customs Board (EMTA)](https://www.emta.ee)

Income Tax