Two tax increases were on the statute book for 1 January 2026, and neither of them happened.
The income tax rate was legislated to rise from 22% to 24%. A separate 2% annual tax on company profits was due to start alongside it, part of the security tax package. The Riigikogu abolished the package on 19 June 2025 and the rate increase was repealed with it, so the corporate rate on distributions stayed at 22%.
If you built your 2026 plan in the second half of 2024, as most people did, you built it around numbers that never arrived.
I am not an accountant and none of this is tax advice. Check every figure below with yours before you act on it. What I want to argue is a marketing point rather than a tax one, and it starts with a question worth putting to yourself: where did the money you set aside for a tax that was cancelled actually go?
For most Estonian companies I have seen, the answer is that it went nowhere. It sat in the account, and the marketing budget stayed exactly where it was in 2024.
The arithmetic nobody says out loud
Estonia does not tax profit when you earn it. It taxes profit when you take it out, at 22% of the gross distribution.
So put one hundred thousand euro of profit through each exit.
Leave it in the company and you have one hundred thousand euro to spend on acquiring customers.
Take it out as a dividend and, before any personal considerations, you have seventy eight thousand.
Every euro you keep inside the company is worth about one euro twenty eight of money in your own pocket. That is not a rounding difference. It is the single largest structural advantage Estonian companies have over almost every competitor they meet in Finland, Sweden, Germany or the UK, and it applies to exactly the kind of spending that compounds.
Now the honest half, because the founders who are cautious about this are cautious for a good reason.
You are not avoiding the tax. You are deferring it. The money is taxed whenever it eventually leaves, so what you actually gain is the return you earn on the deferred twenty two thousand in the meantime. If that money goes into something that returns nothing, the tax system has not made you richer. It has made it cheaper to waste money, which is a different thing entirely and considerably more dangerous.
The deferral does not make bad marketing good. It removes the excuse for underfunding marketing you have already proved works.
Those two sentences are the whole argument and they point in opposite directions on purpose.
What the state actually did in 2025
Look at the two changes together rather than separately, because the pair of them says something.
VAT went from 22% to 24% on 1 July 2025. That was announced as a temporary three year measure and has since been confirmed as permanent, with the reversion to 22% in 2029 removed from the plan.
Meanwhile the income tax rise and the profit tax were both scrapped.
So selling to a consumer got permanently more expensive, and keeping capital inside the company stayed exactly as cheap as it was.
If you sell to Estonian consumers, that is a margin squeeze on 1.3 million people who now pay 24% VAT on everything, and it is the second squeeze in eighteen months. If you sell abroad, most of that does not touch you. Either way the reinvestment side of the ledger was left alone deliberately, and that is worth noticing when you decide what to do with retained profit.
Where the reinvestment case is actually strong
Not everywhere. Three places, and they share a property.
A channel already producing customers at a cost you know. If you know what a customer costs you and what one is worth, more money into that channel is arithmetic rather than a bet. This is where the deferral genuinely pays, and it is the case founders most often decline because the spending feels large in a month where nothing has gone wrong.
Anything that keeps working after you stop paying for it. Content that ranks, a brand people recognise, a sales asset that gets forwarded internally. A euro of paid media buys a click once. A euro of the other thing keeps returning after the campaign ends, and it is the kind of spending that gets cut first precisely because the return is slow enough to argue about.
Export market entry, which is the Estonian case specifically. With 1.3 million people at home, growth past a certain point has to come from Finland, Sweden, Germany or further. That entry is expensive and slow, and the first customer in a new market is worth more than the revenue on the invoice. I wrote separately about why the reference customer is the real asset in Nordic sales, and funding that properly is exactly the kind of long payback the tax structure is built to accommodate.
Where it is weak: an unproven channel, a rebrand nobody asked for, a conference stand because a competitor had one. The tax treatment is identical and the return is not.
The test I would apply
Before moving any retained profit into acquisition, three questions in this order.
Do you know your cost per customer in this channel from actual data, not from an agency deck? If not, the answer is to spend a small amount finding out, not a large amount hoping.
Would you still fund this if the money were taxed at 22% first? That reframing strips out the tax argument and leaves the business one. If it only makes sense because the money is cheap, it does not make sense.
Can the company survive the payback period? Deferring tax to fund a nine month payback is sound. Doing it with money you will need in four months is how a good tax position turns into a cash flow problem.
Anything that passes all three is a reasonable use of retained profit. Anything that fails the second one was never a marketing decision.
The part I would actually change
Most Estonian founders I talk to budget marketing as a monthly cost, set as a percentage of revenue, reviewed when things get tight and cut first when they do.
That is the correct way to budget a cost. It is the wrong way to budget an investment, and the tax system here is unusually clear about which one it thinks this is.
The country built a corporate tax structure specifically to reward capital that stays inside the business and does something. In 2025 it declined to weaken that structure twice, while making consumption more expensive. Reading that as an accounting curiosity rather than as a direction of travel is the mistake, and it is a very common one.
Go and find out where the money you budgeted for the 2026 tax rise ended up. Then decide, deliberately rather than by default, whether it is doing more sitting in the account than it would do in the one channel you already know converts. I wrote about distribution being the harder half of the problem for Estonian companies and this is the funding version of the same argument.
If you’d like to think through your own version of that decision, drop me a line on email, WhatsApp or LinkedIn and we can have a quick chat. I’m contracted full time so this isn’t a pitch, and my notes on how I work cover the rest.