New year to bring tax, excise duty hikes, several other changes

TALLINN - The year 2024 will bring tax and excise duty increases and several other changes in the field of the Estonian Ministry of Finance.

From next year, applications can be submitted to raise the rate of the second pension pillar contribution from the gross salary from 2 percent to 4 or 6 percent from 2025. Increasing the payment rate is voluntary, but it is a good opportunity to contribute additionally to the second pillar.

In order for the new payment rate to take effect from 2025, the application must be submitted by the end of November at the latest. The new payment rate is valid as long as no application has been made to change it. The payment rate can be changed once a year if necessary. For applications submitted at the end of November, the new rate will apply from the following year, for applications submitted in December from the year after next.

The increase in the payment rate does not affect the money coming into the second pillar from social tax and it will remain at 4 percent for all options.

The general VAT rate will increase from 20 percent to 22 percent in the new year. Increasing the VAT rate from 20 percent to 22 percent will lead to a 1.67 percent increase in the price of goods and services and the impact on inflation will reach 1.40 percent in 2024.

From 2024, natural persons can no longer deduct additional tax-free income from children, spouses and mortgage interest from their taxable income. Deductions can still be made in the income declaration submitted for this year.

In 2024, the monthly rate on which the payment of social tax is based will be raised from 654 euros in 2023 to 725 euros, meaning the minimum social tax obligation for the employer is 239.25 euros per month.

Excise duty on alcohol and tobacco will increase by 5 percent and tax rates on various types of gambling will change. In addition, fuel excise duty will increase by 7 percent, natural gas excise duty by 20 percent, and electricity excise duty by 45 percent from May 1. Fuel and electricity excise duty rates will gradually increase from next year after the temporary reduction in 2020.

Online platforms will start submitting information to the Tax and Customs Board about both the persons operating through the platform and the income they earn. Information is provided once a year and will be submitted for the first time in January 2024 about the income earned in 2023.

In the future, the payment service provider must store and transmit data on cross-border payments to the tax authority. Information about payment recipients must be provided when the total number of payments per payment recipient exceeds 25 payments per quarter.

Information about collected payment data will be exchanged between EU tax authorities through the EU's Central Electronic System of Payment information (CESOP) and this will contribute to the reduction of fraud in cross-border e-commerce.

In 2024, the average old-age pension will rise to 776 euros per month, or 9,312 euros per year, and the tax-free income of old-age pensioners will also rise to the same level. The amount of the latter is not affected by the income of a person of retirement age.

Virtual currency service providers operating in Estonia are obliged from Jan. 1, 2024 to regularly provide the central bank and the Financial Intelligence Unit (FIU) with information on their activities, due diligence measures, services provided and assets and liabilities. Regular reporting allows the FIU to keep the risk picture of the sector up-to-date and to react faster to threats as they emerge, and to take risk-mitigating measures more quickly.

According to a law amendment, the increase in the salary of the prime minister, ministers, members of the Supreme Court, the prosecutor general, the head of the Government Office, judges, the public conciliator and the commissioner for gender equality and equal treatment will be reduced so that it constitutes half of the increase calculated according to the previous methodology for the four-year period. While the salary of ministers would have otherwise increased by 11 percent in 2024, now it will increase by 5.5 percent.

The change also affects those civil servants whose salary is linked to the salary of higher officials, such as ministry secretaries general, public prosecutors and prosecutors, assistant judges and advocates general, members of the public procurement dispute committee and heads of the labor dispute committee. In 2028, the previous procedure for calculating salaries will be restored.