Estonia: Changes in Income Tax, Exempt Compensation, Social Security Ceiling, Minimum Wage & Security Tax

Income Tax

The income tax rate will increase from 20% to 22%, effective from 2025.

Tax-Exempt Daily Allowance for Foreign Business Travel

The tax-exempt daily allowance for foreign business travel will increase from EUR 50 to EUR 75, regardless of the destination country. However:

• This allowance can be applied for only the first 15 days of business travel.
• It is also limited to a maximum of 15 days per calendar month.

For travel days exceeding this limit, the tax-exempt amount will increase from EUR 32 to EUR 40.

Compensation for Personal Car Use for Business Purposes

The compensation for using a personal car for business purposes will increase:

• From EUR 0.30 to EUR 0.50 per kilometer.
• The total monthly limit will increase to EUR 550 (currently EUR 335, applicable until the end of 2024).

Compensation for Health and Sporting Costs

The total tax-exempt compensation for health and sporting costs will be:

• Limited to EUR 400 per annum per employee.
• The current quarterly restriction of EUR 100 will be abolished.

The list of tax-exempt health compensations will also be expanded to include:

• Massage services, and
• Services from licensed professionals in dental care, psychological treatment, and nutritional consultation.

Tax-Exempt Accommodation Expenses

For employees working under an employment contract and whose place of residence is at least 50 km away from their workplace (with no residential property closer), the tax-exempt limits for accommodation expenses will increase:

• From EUR 200 to EUR 500 per month in Tallinn or Tartu.
• From EUR 100 to EUR 250 per month in other areas of Estonia or abroad.

Social Security Minimum Base

Increased from €725.00 to €820.00.

This results in a minimum SSI contribution of €820.00 x 33% = €270.60.

Increase In Minimum Wage

Increased from €820.00 to €886.00, with the hourly rate rising from €4.86 to €5.31.

Security Tax

The 2% security tax on personal income will be levied on the taxable income of both resident and non-resident natural persons from 2026 until 2028.

The security tax withheld is to be remitted by the 10th of the month following the month of payment along with a security tax return.

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.

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Estonia – Change In Income Tax, Exempt Compensation Social Security Ceiling, Minimum Wage And Introduction Of Security Tax

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