The general VAT rate will increase from 22% to 24% starting in July 2025
The Estonian government has decided to raise the general value-added tax (VAT) rate from the current 22% to 24%, effective from July 1, 2025. The reason for the change is the Estonian “security tax,” which increases the VAT rate by 2 percentage points. The general rate is applied in VAT taxation whenever there is no specific provision that provides a basis for applying a reduced rate or tax exemption. When choosing the correct tax rate, the time of the transaction must be taken as the basis.
It is particularly important to note that, starting from July 1, 2025, taxpayers will no longer be allowed to apply the previous 20% VAT rate to long-term contracts concluded before May 1, 2023. This exception has previously been permitted for certain long-term agreements, but it will be abolished once the new VAT rate comes into force. Therefore, it is essential for businesses to review their existing contracts and prepare for potential price adjustments.