The Estonian parliament, Riigikogu, has passed a government-proposed bill to introduce a security tax aimed at bolstering the country's defense capabilities, Report infofms via Xinhua.
The security tax includes three key components: first, the value-added tax, or VAT, will increase by 2 percentage points starting in the middle of 2025; second, the personal income tax rate will also rise by 2 percentage points, with the change taking effect at the beginning of 2026; finally, a new corporate profit tax, set at 2 percent, will also be implemented starting at the same time as the personal income tax increase.
Under the new law, the VAT rate will increase to 24 percent from July 2025, and the personal income tax rate will also rise to 24 percent starting in 2026.
The Ministry of Finance estimates that the new tax will generate additional budget revenue of 113 million euros (119 million U.S. dollars) in 2025 and 751 million euros in 2026. Details regarding the allocation and use of these funds will be outlined in the 2025 state budget and the 2025-2028 budget strategy.
The bill was passed in Riigikogu on Wednesday, with 53 votes in favor and 27 against.