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Tax-free pension in Estonia to remain at EUR 776 per month from 2025

The Estonian Ministry of Social Affairs has drafted a bill that would fix the tax-free income of a person who has reached retirement age at 9,312 euros per year, or 776 euros per month, from 2025.

Although, according to the bill, the tax-free income of people of retirement age will no longer increase together with increases in the average old-age pension, it will still be higher than the general tax-free income of 700 euros per month.

The amendment aims to raise tax revenue. According to the explanatory memorandum added to the bill, it will make the calculation of tax-free income simpler and fairer.

“The main purpose of the tax exemption introduced by the current regulation was to support working pensioners, as earning a salary in addition to a pension led to a reduction in tax-free income. As from 2025, the tax-free income will no longer depend on the size of income, this objective has  substantively ceased to exist,” the explanatory memorandum says.

The authors of the bill find that the higher tax-free income for individuals who have reached retirement age has created some inequality, as income recipients are treated differently depending on whether they have reached retirement age or not.

“Inequalities will be leveled out as the tax-free income of those who have reached retirement age will be fixed, and from next year the regressive basic exemption will be replaced by a uniform basic exemption. This is a move back towards a uniform and simple income tax system,” the explanatory memorandum adds.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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