According to the income tax amendment adopted by the Parliament earlier in 2023, from 2026 the annual tax exempt basic allowance of the resident individual will increase generally to EUR 8 400 (EUR 700 per month), regardless of the amount of taxable income derived by the individual. However, for individuals who have reached the retirement age, the annual tax exempt basic allowance will remain in the amount of EUR 9 312 (EUR 776 per month). In addition to Estonian tax resident individuals, the tax exempt basic allowance can be applied to their Estonian taxable income also by individuals who are resident in other EEA member states.
For applying the monthly tax exempt basic allowance, it is generally required to submit a written application to one employer or payer of the income prior to 2026 (if the previously submitted application will no longer fulfil its purpose in 2026). The unused tax exempt basic allowance cannot be applied by the employer or payer of income to payments to be made in the following months. If that application will not be submitted and it has not been submitted also previously to the respective payer of income, then the income tax will be withheld from the monthly payment starting from the first euro and the individual is entitled to apply the tax exempt basic allowance in his/her annual individual income tax return for 2026 (which is due to be submitted by 30 April 2027, at the latest).
In addition, the income tax amendments prescribe that the exemption of donations for the benefit of Ukraine will be extended until the end of 2027. Thus, companies can provide without tax limitations also during next years gifts and donations for the benefit of Ukraine, if these will be provided to the following non-governmental organizations listed in the Income Tax Act:
1) MTÜ Estonian Refugee Council;
2) MTÜ Mondo;
3) Ukrainian Cultural Centre;
4) National Defence Promotion Foundation;
5) Estonian Red Cross;
6) Rescue Association;
7) MTÜ Rotary Klubi Tallinn Vanalinn;
8) Mittetulundusühing Freedom Convoy.
