Starting January 2025, Estonia is introducing updates to its tax policies and entrepreneur account system. These changes are designed to make business easier for small-scale entrepreneurs while reducing tax burdens for individuals in certain income brackets. Here’s a breakdown of what’s new and how it affects entrepreneurs in Estonia.
Big Tax News for 2025
The government has made a significant tax adjustment:
- Income between €25,000 and €40,000 per year will now be taxed at 20%, instead of the previous 40%. This is great news for those earning in this range, as it drastically reduces the tax burden.
Updates for Entrepreneur Account Holders
The entrepreneur account system, known for its bureaucracy-free structure, will see the following changes:
1. Business Income Tax and Pension Contributions
- For account holders not in the second pension pillar, the business income tax remains 20%.
- For those in the second pension pillar, their tax rate increases based on their funded pension contribution:
- 22% for a 2% contribution.
- 24% for a 4% contribution.
- 26% for a 6% contribution.
2. Health Insurance Eligibility
- To qualify for health insurance, entrepreneur account holders must earn €2,255 in one calendar month through their account.
3. Enhanced Transparency
- You can now check whether a specific entrepreneur account belongs to a specific person, improving accountability and ensuring trust in business transactions.
What is the Entrepreneur Account?
The entrepreneur account is a hassle-free way for natural persons in Estonia to run small businesses or earn additional income. It eliminates the need for financial statements, monthly tax returns, or manual tax payments—everything is handled automatically.
Who is it for?
The entrepreneur account is ideal for:
- Babysitters, pet sitters, domestic helpers, and gardeners.
- Artisans, crafters, and sellers of homemade or homegrown goods like food, plants, or seedlings.
- Individuals offering repair or construction services without incurring direct costs (where costs are borne by the customer).
Why choose it?
The system is simple, affordable, and tailored to small-scale entrepreneurs who want to avoid complex paperwork while focusing on their passion or side hustle.
Estonia continues to set an example by fostering a business-friendly environment with reduced taxes and streamlined systems. If you’re a small entrepreneur or planning to become one, the entrepreneur account is worth exploring. With the new tax changes coming into effect in 2025, running a small business has never been easier—or more rewarding.
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