Estonia 22% Flat Income Tax - Simplicity at Its Best – Estonia

Estonia 22% flat rate applies to: employment income (salary, wages), business income (self-employed, freelancers), rental income, capital gains (shares, property, crypto), dividends received, interest income, royalties. No differentiation by source. Simple calculation: (income - €700) × 22% = tax.

Estonia originally planned increase personal income tax to 24% from 2026. Parliament voted July 2025 to cancel increase - remains 22%. Defense tax proposal also abandoned. Estonia maintains competitive rate despite fiscal pressures. Stability for taxpayers, businesses.

Estonia basic exemption €700/month (€8,400/year) 2026: available to ALL residents regardless of income. Previous 'tax hump' abolished - middle earners (€1,200-2,100/month) previously lost allowance gradually. Now everyone gets full €700. Pensioners €776/month. Automatic application by employer. Major benefit for middle-income workers.

Gross €1,000, tax-free €700, taxable €300 → tax €66 (22% of €300) = 6.6% effective rate. Plus €16 unemployment = €918 net (91.8% net).

Gross €3,000, tax-free €700, taxable €2,300 → tax €506 (22% of €2,300) = 16.9% effective rate. Plus €48 unemployment = €2,446 net (81.5% net).

Gross €10,000, tax-free €700, taxable €9,300 → tax €2,046 (22% of €9,300) = 20.5% effective rate. Plus €160 unemployment = €7,794 net (77.9% net). Approaches 22% flat rate as income rises.