Estonian restaurants face wave of closures as costs soar and VAT stays high
A growing number of Estonian eateries, including Tallinn’s Ülo, are shutting down because rising labor, energy and tax expenses are eroding profits.
Restaurant closures have become a near-monthly occurrence in Estonia, with Ülo in Tallinn’s Kalamaja district slated to close this Sunday. Owners attribute the wave of shutdowns to customers spending less while costs for labor, taxes, gas and electricity continue to rise. Steve Heinlo, co-owner of Ülo and other venues, noted that even a modest profit in 2024 could not offset an 18% drop in turnover last year, leading to a loss.
Tartu restaurateur Henri Loodmaa reported similar pressures, saying higher bills do not compensate for soaring raw-material and wage costs. The Estonian Hotel and Restaurant Association warns the sector is on the brink of crisis and urges a reduction of the 24% VAT on food service to 13%, citing examples from other European countries. Without such relief, the association projects the loss of hundreds of restaurants and thousands of jobs by 2028.
Why it matters
The closures threaten Estonia's food-service jobs and tourism revenue, highlighting the impact of tax policy on small businesses.
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