The most important points of the coalition agreement for companies

The Reform Party, Estonia 200 and SDP announced a new coalition agreement, which stipulates, among other things, the increase of value added tax and corporate income tax, the removal of the lower income tax rate for regularly distributed profits and the introduction of a car tax. In the following, we highlight the most important points of the new coalition agreement. 

Taxes 
According to the coalition agreement, the value added tax will increase by 2% in 2024. From January 1, 2025, the lower VAT difference for accommodation service providers will also be removed, i.e., the VAT rate will rise from the current 9% to 22%.

In addition, the corporate income tax will increase by 2% in 2025. The personal income tax will also increase by the same amount, but at the same time there are plans to eliminate the currently valid tax curve and increase the income tax exemption to 700 euros per month. The coalition also plans to remove the lower rate of income tax on regularly distributed profits. This means that in the future, if regular dividends are paid, the income tax will increase from the current 14% to 22%.

The emerging coalition also wants to introduce a car tax from July 1, 2024, but its exact content is currently unknown. 

According to the coalition agreement, the use of packaging and plastic is also supposed to be taxed in order to reduce the generation of packaging waste. It also aims to review environmental and resource fees and tax deforestation. 

According to the coalition agreement, vices and health risk behaviours will continue to be taxed while preventing cross-border trade. Therefore, an increase in alcohol and tobacco excise is expected. In addition, the goal of the new coalition is to increase the state's tax revenue from gambling.

The emerging coalition also plans to give local governments the opportunity to introduce local taxes. 

Green reform and circular economy
The emerging coalition wants, together with entrepreneurs, to shape Estonia's economic model into a climate-neutral and sustainable model. 

In cooperation with scientists, experts, community associations and entrepreneurs, the plan is to adopt a climate law and create legal clarity and investment certainty to achieve climate goals. 

The new coalition also wants to improve the functioning of the producer responsibility system for packaging waste and set a separate target rate for the recycling of sales packaging. 

The coalition focuses on the development of circular solutions on high-impact economic sectors, i.e., resource-intensive industrial sectors, and creates targeted measures and programs to help companies increase efficiency and develop solutions for material recovery at a higher level. 

In addition, the new coalition wants to promote circular economy business models and innovative ideas, such as the sharing economy and the product-as-a-service concept, also in terms of services provided by the state. 

Energetics
The emerging coalition aims to make Estonia an exporter of renewable energy. 

In order to achieve the 100% renewable electricity target, there is a desire to organize underbids with a price ceiling and floor, including faster construction of offshore wind farms. 

The emerging coalition has set the goal of accelerating the planning, construction, and access to the network of renewable capacities.

In addition, there are plans to support industrial companies in making the energy transition and improving resource efficiency. 

The new coalition also promises to invest in networks according to a coordinated plan of network companies with the aim of increasing weather resistance, cleaning the networks of phantom connections, strengthening connections with islands and giving the opportunity to connect new productions. 

The plan is to separate oil shale mining from Eesti Energia and create a separate company. The separation of Elektrilevi from Eesti Energia is also desired to be completed.

The plan is to end the burning of wood in the industrial production of electricity and cooperate to end it in other European countries, but to use biomass in local cogeneration plants. 

Labour relations
The coalition being created aims to conclude a 3-party goodwill agreement with trade unions and employers in May 2023 so that the minimum wage will be 60% of the median wage by 2027 and the minimum wage will grow faster than the average wage.

In addition, the new coalition plans to make the regulation of employment modern and flexible. Labour legislation must adapt to the changed nature of the employment relationship, involve as many groups of people as possible into the labour market and enable flexible workload and organization, ensuring social guarantees. 

Research and development, innovation
The coalition agreement states that we will invest at least 1% of GDP in research and development and aim for private sector R&D expenses to be at least 2% of GDP. 

In addition, the emerging coalition wants to launch an applied research centre in cooperation with businesses and research institutions and increase the funding of the applied research program according to the national focus areas. 

Infrastructure
The coalition wants to proceed with the construction of traffic-dangerous places on the Tallinn-Tartu, Tallinn-Pärnu roads in the agreed volume, using the principle of 2+2 or 2+1 lanes. 

In addition, it is desired to continue the development of Rail Baltic and to proceed with the electrification of the railway. The new coalition also supports the European Commission's initiative to transfer rail traffic in the Baltics to a pan-European railway. 

Forestry
According to the coalition agreement, forest management and wood valorisation as a whole must ensure that the forestry sector is a carbon sequester. Estonian wood must be valued to the maximum and the final products must have maximum carbon sequestration capacity. 

The new government is planning to digitize the entire logging process and related reporting. 

In addition, the coalition wants to adopt the prepared forestry development plan. 

Other topics related to business
The coalition plans to deal systematically with the availability of capital for Estonian companies, including encouraging the investment of pension fund money in the Estonian economy in order to promote the accumulation of national capital and the competitiveness of Estonian companies.

The emerging coalition plans to carry out active economic diplomacy, which will allow companies to expand to foreign markets, bring in new investments and create prosperity for Estonia as a whole. 

The aim is to introduce at the level of laws the principle of one-time submission of data for companies.

The new coalition wants to support the continuation of research into the exploitation of mineral resources important for Estonia and the European Union, and to find a way to create new wealth for the Estonian people while preserving the environment. 

In addition, the new coalition wants to increase the financial capacity of the Business and Innovation Agency to guarantee large projects, green investments and the expansion of Estonian companies to foreign markets. 

The coalition also sets the goal that Estonia is the best country in Europe in terms of business and tax environment and international agreements, where to create and maintain a company's headquarters and through which to manage assets globally. 

The new coalition plans to support the full implementation of digital invoicing in the private sector as well. 

In addition, it is planned to consolidate the most important public sector services and information related to the services in the digital gateway of eesti.ee, creating proactive or event service-based solutions.