Estonia

Estonia's FDI screening mechanism, established under the Foreign Investment Reliability Assessment Act of January 2023 and significantly expanded in September 2024, has seen modest utilisation since inception but is expected to grow in relevance given heightened activity in the defence sector and new European Commission coordination initiatives among EU member-state FDI authorities. Non-EU investors targeting critical sectors—including military goods, dual-use items, geological exploration, and vital-services infrastructure—must obtain prior authorisation from the Consumer Protection and Technical Regulatory Authority (CPTRA) or risk corrective enforcement.

White & Case LLP · 2026-04-01

Foreign direct investment stock in Estonia exceeds €27 billion, with material concentration in information technology, financial services, and holding structures; the persistence of inbound capital following regulatory tightening in 2023–2024 indicates structural rather than opportunistic investor motivation. Estonia's distribution-based corporate tax model—under which retained earnings are untaxed and corporate income tax is triggered only upon dividend distribution—continues to differentiate the jurisdiction within the EU single market.

The Baltic Times · 2026-02-25

The Estonian government approved a supplementary defence investment programme (KILP) on 24 April 2026, committing an additional €2.8 billion over 2026–2029 and raising the annual defence budget to an average of 5.4% of GDP. The associated defence industry policy for 2024–2030 targets domestic arms export revenues of €1.4 billion and total sector sales of €2 billion annually by 2030, with over 30 government measures—including capital-raising support, a defence industrial park, and a testing ecosystem—designed to attract investment into cyber defence, autonomous systems, and dual-use technologies.

Defense Express · 2026-04-24

Estonia's 2026 State Budget, approved by the Riigikogu in November 2025, allocates €684.2 million to railway development and maintenance—including €435.7 million for Rail Baltica—and €283.1 million for road infrastructure, sustaining demand in civil engineering and cross-border transport connectivity. The Ministry of Economic Affairs and Communications has earmarked €40 million annually to attract large-scale investments and €117 million for business research and development, including €27.3 million in innovation loans.

World Construction Network · 2026-01-12

The Organisation for Economic Co-operation and Development (OECD) published its Services Trade Restrictiveness Index (STRI) 2026 country note for Estonia in February 2026, providing an updated regulatory profile across 22 services sectors and identifying areas where further reform could reduce trade restrictions. Estonia's export market share is forecast to expand in 2026, supported by stronger goods exports and pre-emptive stockpiling ahead of US tariff measures that temporarily stimulated global trade volumes.

OECD · 2026-02-24

From 1 January 2027, Estonia will expand the EU One Stop Shop (OSS) VAT system, enabling multi-country VAT registration via a single portal, and will introduce a mandatory reverse-charge mechanism for B2B transactions where the supplier is not VAT-registered in the recipient's country. Businesses with cross-border EU activity should initiate compliance reviews in advance of the implementation date, as the changes impose strict accounting accuracy requirements.

Campio Group · 2026-05-22

The European Commission's Autumn 2025 Economic Forecast projects Estonia's real GDP growth at 2.1% in 2026 and 2.0% in 2027, following stagnation in 2024 and an estimated 0.6% expansion in 2025. Private consumption is expected to strengthen, supported by favourable tax reforms and a declining interest burden, while investment is set to receive a substantial boost from increased defence spending; however, the high import content of defence procurement is forecast to weigh on net exports.

European Commission – DG ECFIN · 2025-11-17

Estonia's 2026 general government deficit is forecast at 4.4–4.5% of GDP, driven by a revenue reduction of approximately 1.4% of GDP from the transition to a universal tax-exemption system and a 1.3 percentage-point increase in defence spending relative to 2025. Public debt is projected to rise from 23.4% of GDP in 2025 to 29.2% by 2027, with the Estonian Fiscal Council cautioning that relaxing the deficit beyond defence-related requirements would accelerate debt accumulation and reduce future fiscal buffers.

European Commission – Draft Budgetary Plan of Estonia 2026 · 2025-08-26

Harmonised Index of Consumer Prices (HICP) inflation reached 5.7% in Q3 2025, primarily driven by the mid-year VAT rate increase to 24%, but is forecast to moderate to 2.8% in 2026 as the effect of past tax hikes dissipates and wage growth slows. Unemployment stood at 7.6% in Q3 2025 and is projected to decline only modestly to 7.2% in 2026 despite the economic recovery, reflecting labour hoarding in prior periods.

European Commission – DG ECFIN · 2025-11-17

Effective 1 January 2026, Estonia abolished the income-dependent 'tax hump' (maksuküür) and introduced a uniform personal tax-free allowance of €700 per month (€8,400 per year) regardless of income level, simplifying payroll administration for employers. Concurrently, the minimum monthly social tax base increased to €886, raising the minimum employer social tax obligation to €292.38 per month and increasing labour cost floors for part-time and low-wage employment arrangements.

PUNAMOON OÜ / Grant Thornton Baltic · 2026-03-26

Estonia's Parliament (Riigikogu) adopted amendments in December 2025 cancelling a previously planned personal income tax increase to 24%, maintaining the rate at 22% for 2026; the planned corporate profit tax was also not introduced, preserving Estonia's distribution-based corporate tax principle. Excise duties on tobacco and alcohol increased by 10% from 1 January 2026, with additional fuel and electricity excise increases effective 1 May 2026, increasing input cost exposure for logistics and energy-intensive operators.

COBALT Legal / 1office.co · 2026-01-20

A Development Monitoring Center report published in April 2026 identified Estonia's defence industry as a potential growth vector, projecting that the sector could reach 6% of GDP by 2035 under an ambitious scenario, with recommended focus areas including cyber defence, autonomous ground and air systems, and dual-use technologies. The report flagged a structural labour constraint: rapid sector expansion could require up to 4,800 additional workers per year, risking personnel reallocation from other high-technology sectors rather than net employment creation.

Pravda Estonia (citing Development Monitoring Center) · 2026-04-02