Taxation, Uneployment and Pensions in Estonia

Working in Europe | Taxation/salaries, Unemployment | Estonia
Income tax returns for the year 2017 is submitted to the Estonian Tax and Customs Board from 15 February to 2nd of April 2018. See other important dates for persons submitting income tax returns here. See more info in Income tax returns tab below.

Taxation

This is a general overview about the Estonian tax system. For further details please follow links to original information provided in the text.

Direct taxes are withheld from the salary automatically by the employer. Direct taxes are income tax, unemployment insurance and the funded pension payment.

Income tax

As of January 2018 the tax-free amount (basic exemption) of 500 euros per month (or 6000 euros per year) will be applied on all types of income.

  • annual income up to 14 400 euros gives 6000 euros as annual (500 euros monthly) basic exemption
  • if annual income is between 14 400 euros and 25 200 euros, basic exemption decreases according to the following formula: 6000 – 6000 ÷ 10 800 × (income amount – 14 400)
  • if annual income is above 25 200 euros, basic exemption is 0.

Salary/Wage and Tax Calculator www.kalkulaator.ee/en/salary-calculator

 

Unemployment insurance

A monthly unemployment insurance tax of 1,6% is deducted from your salary by your employer.

Funded pension payment

A funded pension payment is withheld from your salary at a rate of 2%, if you have joined the optional funded pension system. You can read more about it in the Pensions section.

Social tax

Social tax is paid by employers at a rate of 33% on all payments made to employees for salaried work performed. Social tax is not part of the salary number; it is calculated on the basis of the agreed (gross) salary. 13% of the social tax goes to the Health Insurance Fund and 20% goes to pension insurance.

There is an extra 0,8% unemployment insurance payed by the employer, not included in the salary number.

Other taxes

The most important of the indirect taxes is the value-added tax (VAT), which is 20% (from 1 July 2009) for most goods. The VAT for some goods, such as books, medicines etc., is 9%. There are also more indirect taxes for gambling, tobacco products and alcohol.

 

For taxation of foreign citizens working in Estonia, it is necessary to determine their taxation residency (they are residents of which country for taxation purposes). A person should be a tax resident in only one country at a time.

Estonia has agreements to avoid double taxation with many countries, incl. all EU member states. Some of these agreements have more favorable conditions for researchers or professors so check the agreement with your home country.

 

The tax exemptions can be applied only if you have certified your residence status in another country to the Estonian tax authority. This can be done by presenting a certificate by the tax administration of your residence country to the Estonian tax authority. The form form TM3 (available on the Estonian Tax and Customs Board portal) can be presented to the Estonian tax authority for claiming application of the Convention for avoidance of double taxation for certifying your country of residence. It is not necessary to submit the document if data on you and your residency have been entered in the register of taxable persons of the Estonian tax administration. Check your status in the register here.

 

Social security contributions

Social security contributions (social tax, unemployment insurance and funded pension payment) will not be paid or withheld in Estonia if the employee has a ceritificate of a posted employee (Form A1) issued by the authorities of an EU country, or a country with which Estonia has a social security agreement (Canada, Ukraine).

 

To which country should your employer pay your social security contributions? Read more about social security on our Health & Social Security in Estonia page.

 

See also:

Estonian Tax and Customs Board - Forms (for determination of residence and avoidance of double taxation)

 
 

 

 

by Tõnu Runnel_visitestonia.ee

Unemployment

Unemployment insurance benefits are paid to legal residents of the EU. To receive an unemployment insurance benefit, unemployment insurance contributions must have been paid for at least 12 months of the previous 36 months. Read more...

 

 

Anete_Palmik_visitestonia.ee

Pensions

Estonia contributes to pensions of foreigners for the time worked in Estonia.The retirement age in Estonia is currently 63 years for men and women. Read more...

 

 

See also:

Estonian Tax and Customs Board - Information for private client

Estonian Tax and Customs Board - Amount of tax-free income beginning from 1 January 2018

Estonian Tax and Customs Board - Submission of income tax returns for 2017

Estonian Tax and Customs Board - Income tax information for employees

Estonian Tax and Customs Board - Conventions for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital

Estonian Tax and Customs Board - How to get refund of income tax to non-resident natural persons in Estonia

Estonian Tax and Customs Board - Taxation of income of non-residents

Estonian Tax and Customs Board - Tax return forms

Estonian Tax and Customs Board - Tax rates

www.kalkulaator.ee/en/salary-calculator Salary/Wage and Tax Calculator

Work in Estonia - Taxation obligations

Last updated in January 2018

Information provided by EURAXESS Estonia