The Estonian Parliament adopted the Security Tax Act on 11 December 2024, which will introduce a new state tax on a temporary basis until the end of 2028 and which according to the coalition agreement will be introduced for the development of Estonia’s defense capabilities and security investments.
Security tax will include three components:
- From 1 July 2025, the increase of standard VAT rate from 22% to 24%.
- From 1 January 2026, the new 2% tax on taxable income derived by individuals and non-residents. Upon the calculation of 2% tax, it cannot be made any deductions otherwise allowed for income tax purposes. Also, the tax rate applicable to entrepreneur account of individuals will be increased by the security tax.
- From 1 January 2026, the new 2% tax on companies’ profits. Generally, the calculation of the new profit tax will be based on accounting profit of the previous financial year, which is partially adjusted for security tax purposes. The first advance profit tax payments will be due by companies by 10 September and 10 December 2026. The first security tax declaration should be submitted by companies in respect of profits derived in 2026 by 10 September 2027.
Security tax will be paid by Estonian resident and non-resident individuals, as well as by resident companies and non-resident companies with permanent establishment in Estonia. In addition, security tax will be paid by non-resident legal entities, which do not have any permanent establishment in Estonia, but derive from Estonia any income taxable under the Security Tax Act.
The provisions of the double tax treaties concluded by Estonia with other countries will be applicable also to the security tax.