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The Riigikogu adopted two draft amendment acts that clarify the regulation of motor vehicle tax and introduce tax relief for families with children and owners of minibuses.

The first amendment brought the Act into line with the Constitution by shortening the motor vehicle taxation period in two cases:

• if a vehicle is permanently deleted from the Estonian motor register (e.g. upon transfer to a foreign country or submission of a certificate of destruction), the taxation period will end on the date of the deletion of the vehicle from the register;
• if a vehicle is temporarily deleted from the motor register due to theft, the tax liability will be suspended for the period during which the vehicle is listed as wanted by the Police and Border Guard Board.

The amendment will enter into force in accordance with the general procedure, but it will apply retroactively from 1 January 2025.

The second amendment reduces motor vehicle tax for families with children. A parent or guardian who has custody of at least one child under the age of 18 and who is the owner or authorised user of at least one category M1 or N1 vehicle subject to motor vehicle tax will have their tax liability reduced by up to 100 euros per child. If both parents have a car, the tax reduction will be divided between them and applied automatically on the basis of the register data. The reduction in motor vehicle tax will be calculated as of 1 January or as of the date of initial registration of the motor vehicle in the motor register.

The tax relief will apply retroactively from the beginning of 2025. Where necessary, the tax authority will declare the issued tax notice invalid and send to the eligible person a new tax notice.

In addition to the tax relief described above, eight- and nine-seater M1 category vehicles will henceforth be taxed at the N1 category motor vehicle registration fee rate. The amendment is anticipated to have a positive impact primarily on large families and persons with disabilities, who can be expected to need larger vehicles. The amendment will enter into force on 1 January 2026.

More information on the legislative proceedings of the draft acts in the Riigikogu is available HERE and HERE.

The draft amendment act currently in the legislative proceedings in the Riigikogu proposes abandoning the planned 2% increase in the income tax and business income tax rates scheduled for 2026. The aim of the proposed amendment is to keep the tax burden at a moderate level, stimulate economic growth and domestic consumption, and support people’s livelihoods by leaving taxpayers with more money in their pockets.

In addition, it is planned to extend the possibility for legal entities to make tax-free donations for the benefit of Ukraine until the end of 2027 in order to encourage support for Ukraine, which is suffering from Russian aggression.

The draft act is urgent and will be handled in the same legislative proceedings as the draft State Budget Act for 2026. The extension of the tax exemption for donations is scheduled to enter into force on 1 January 2026. More information on the legislative proceedings of the draft act in the Riigikogu is available HERE.

The purpose of the draft amendments currently in the legislative proceedings in the Riigikogu is to update the Gambling Act and related regulations, taking into account technological developments, money laundering risks, and the need to increase tax revenue. Additionally, the amendments aim to increase transparency and credibility in the sector, strengthen supervision, and support funding for culture and sports.

The main amendments proposed are as follows:

• the requirements for applying for an activity licence will be tightened and subject to assessment by the Financial Intelligence Unit;
• the use of crypto assets in gambling will only be permitted through service providers licenced by a relevant authority in the EU;
• auditing will become mandatory for all gambling operators;
• the gambling tax rate will gradually decrease from 6% to 4% between 2027 and 2029;
• fines will be increased tenfold;
• age limits will be raised (e.g. the minimum age for playing an online instant lottery will be 21 years);
• the possibility of suspending an operating permit will be introduced for exceptional circumstances (e.g. COVID);
• the Cultural Endowment Act will include new endowments to support sports facilities and private funding.

If the revenue from remote gambling tax exceeds 27 million euros in a fiscal year, the excess revenue will be distributed as follows:

• 8% will remain in the state budget;
• 12% will be allocated to the Estonian Cultural Endowment, of which 60.6% will be allocated to cultural facilities and 2% to promoting the creative work of lecturers in the field of arts and folk culture;
• 80% will be allocated to the Estonian Cultural Endowment and will be distributed as follows:
• 75% to the sports facilities endowment, which will finance nationally important sports facilities in accordance with the Estonian Olympic Committee’s list of priorities;
• 25% to the endowment for attracting private capital to support culture and sports, through which all non-profit associations and foundations operating in the fields of culture and sports, included in the list specified in section 11 of the Income Tax Act, that have used private funding and applied for support, will be supported. Grants will be awarded in an amount of up to 50% of the private donation made to the grant applicant, and the grant round will be opened each calendar year within the limits of the eligible funds received in the previous year.

The main part of the draft is scheduled to enter into force on 1 January 2026, and the tax rate changes will gradually come into effect between 2027 and 2029. More information on the legislative proceedings of the draft act in the Riigikogu is available HERE.

On 20 October 2025, amendments to directly applicable EU Regulation 2023/956, published in the Official Journal of the European Union, entered into force, introducing a carbon border adjustment mechanism on imports of certain product groups into the EU customs territory.

A significant change was the introduction of a tax-free threshold for companies that import less than 50 tonnes per year of goods covered by CBAM. Several simplifications were also introduced for importers concerning emissions reporting, the authorisation of declarants, and emissions calculation.

More information is available in the newsletter of KPMG’s EU Tax Centre HERE.

The adopted EU Regulation is available HERE.