Estonia publishes draft laws and tax hikes
On 26 April 2023, the Estonian government published four draft laws. These laws are now open for public consultation and include proposals to raise the VAT and income tax rates to 22%. In addition, the proposal aims to eliminate income tax exemptions and increase gambling tax rates.
The motivation behind the numerous tax hikes forms part of Estonia’s fiscal consolidation plan, which aims to improve the state budget while increasing defense spending. The majority of the revenue from the tax hikes is said to go to Estonia’s green transition, defense spending, and infrastructure.
The proposed tax hikes have been agreed upon in the new coalition program for 2023 – 2027 and are currently within the period for public consultation. After that, it will be sent to parliament for adoption. To prepare for the potential changes, here are five tax rate hikes businesses must be aware of.
The standard VAT rate (from 1 January 2024)
The standard value-added tax (VAT) rate will increase by 2%, making the standard rate 22% starting 1 January 2024.
Increased gambling tax rates
Starting 1 January 2024, the rates of gambling tax will increase as follows:
| Gambling tax rates | 2023 | 2024 |
| Per gambling table per month | EUR 1,278.23 | EUR 1,406 |
| Per machine of a game of skill | EUR 31.95 | EUR 32 |
| Total amount received from the sale of lottery tickets | 18% | 22% |
| Winning pot of commercial lottery | 18% | 22% |
| On the total amount of bets (less the winnings) from the events of a totaliser. | 5% | 6% |
| On the total amount of bets (less the winnings) from events of an online game of chance or an online game of skill. | 5% | 6% |
| On the total amount of participation fees (less the portion accruing to the prize pool, in certain cases) from the events of organising tournaments of a game of chance. | 5% | 6% |
Individual and corporate income tax rate increase (from 1 January 2025)
The new draft tax laws also increase the individual and corporate income tax rate from 20% to 22%. In addition, the lower 14% discounted tax rate will be repealed.
The reduced VAT rate on accommodation abolished (from 1 January 2025)
The reduced VAT rate on accommodation services of 9% will be repealed and subject to the standard rate of 22%.
Excise tax rate increase (2024 – 2026)
The excise rates are set to increase incrementally at 5% per year. This includes a yearly 5% spike in rates on alcohol, cigarettes, cigars, cigarillos, smoking tobacco, and tobacco liquid.
Navigate a changing VAT landscape with confidence
The VAT landscape is prone to change. However, that doesn’t mean you must leave significant VAT recovery opportunities in the air. Instead, navigate VAT changes with confidence and compliance, with the VAT IT experts in your corner.
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