Estonia's tax system is unusually simple and unusually badly reported. A flat rate, one allowance, no bands — and three changes in eighteen months that most published guidance has not caught up with.
One rate, one allowance, and nothing you pay for social insurance
Income tax is 22%, flat. The basic exemption is €700 a month, flat since 1 January 2026. VAT is 24%. Corporate profit is taxed at 0% while retained and 22% on distribution.
Social tax is 33% and your employer pays it on top of your salary — it never comes out of your pay.
Income Tax
22% flat, and the €700 monthly allowance.
documentSocial Tax
The 33% your employer pays, not you.
chartSalary Calculator
Gross to net, with employer cost.
euroVAT
24% since July 2025, and the €40,000 threshold.
laptopCompany Tax
0% on retained profit, and what it does not mean.
Every Rate on One Page
| Tax | Rate | Who pays |
|---|---|---|
| Income tax | 22% | You, after deductions and the basic exemption |
| Basic exemption | €700/month | Flat for everyone since 1 Jan 2026 |
| Social tax | 33% | Your employer, on top of gross |
| Unemployment insurance | 1.6% + 0.8% | You and your employer |
| Second pillar pension | 2% / 4% / 6% | You, if you joined |
| Corporate, retained profit | 0% | Nobody — that is the point |
| Corporate, distributed profit | 22% | The company, on distribution |
| VAT, standard | 24% | The consumer |
| VAT, reduced | 13% / 9% | Accommodation; publications and medicines |
| VAT registration threshold | €40,000 | Per calendar year |
Three Things Most Guidance Gets Wrong
Income tax is 22%, not 24%
The rise to 24% was legislated in June 2025 for 1 January 2026, then repealed that December before entering force. Several major advisories published the 24% figure and have not corrected it.
The basic exemption no longer tapers
Until 31 December 2025 it shrank as income rose and hit zero above €25,200 — the maksuküür. From 1 January 2026 it is a flat €700 a month for everyone.
The 14/86 corporate rate is gone
The reduced rate on regular distributions was abolished on 1 January 2025. Distributed profit is taxed at 22% and nothing else. One tail survives, and guides that say the 7% withholding is simply gone are wrong about it: under the transitional provision in Income Tax Act § 61(68), profit that was taxed at 14/86 up to 31 December 2024 still carries 7% withholding when it is redistributed to a natural person. See self-employment for when that reaches you.
Frequently Asked Questions
What is the income tax rate in Estonia?
22%, flat, with no bands. Not 24% — that rise was repealed in December 2025 before taking effect.
How much of my salary do I keep?
On €2,000 gross with the default second-pillar rate, €1,657.84 — about 83%. Unemployment insurance and the pension contribution come off first, then 22% income tax on what is left after the €700 exemption.
Is Estonia a low-tax country?
For companies reinvesting profit, unusually so — retained earnings are untaxed. For employees the total burden is ordinary for the EU; it is just distributed differently, with the employer carrying the 33% social tax rather than the employee.