Taxation

Working in Europe | Taxation/salaries, Unemployment | Estonia

Estonian taxation system is considered to be simple and liberal. Compared to most European countries, the major difference is that income tax has only one general flat rate.

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

As of January 2015, income tax is 20%, and there is a monthly unemployment insurance tax of 1,6%, which is deducted from your salary by your employer.

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.

As of January 2016, the sum of 170 euros from the monthly salary is income tax free for Estonian residents. You must ask your employer to take the income tax free sum into account monthly for salary payments. Income tax is not charged on compensation for official travel, accommodation and daily allowances, if these are within the limits established by the law.

Social tax is paid by employers at a rate of 33% on all payments made to employees for salaried work performed, as well as an extra 0,8% unemployment insurance. 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.

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.

Income tax returns of 2016 must be presented to the Estonian Tax and Customs Board by 31st of March 2017. See other important dates for persons submitting income tax returns here. See more info in Income tax returns tab below.

There is also a land tax for landowners. The land tax varies in different towns and counties and must be paid by the landowner according to the tax announcement that he/she receives from the Estonian Tax and Customs Board.

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.

 

See also:

Estonian taxes and tax system (presentation by the Ministry of Finance)

Estonian Tax and Customs Board. Information for private client

Estonian Tax and Customs Board. Income Tax

Estonian Ministry of Finance. Agreements to avoid double taxation

Estonian Tax and Customs Board. Refund of the overpaid income tax in Estonia

Estonian Tax and Customs Board. Foreigners coming to work to Estonia – taxation checklist (PDF)

Income Tax Act

Salary/Wage and Tax Calculator (unofficial website)

Unemployment Insurance

Unemployment insurance is a compulsory insurance that is collected to pay benefits to employees in the event of unemployment. All employees pay in 2012 2% of their earnings and employers pay 1% of the payroll for unemployment insurance. Unemployment insurance is withheld from the employees’ salary automatically. Persons, who are old enough to receive an old age pension do not have to pay unemployment insurance.

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.

A legal resident of the EU has the right to apply for an unemployment insurance benefit from the country where he or she last worked and paid taxes. The period of time that a person has worked and paid unemployment insurance contributions in other EU countries is considered when deciding whether and how long a person is entitled to receive the unemployment insurance benefit. The sum of the benefit paid by Estonia is calculated on the basis of the wages earned in Estonia.

An unemployed person should register himself at an employment office of the Estonian Unemployment Insurance Fund in order to receive the unemployment insurance benefit and unemployment benefit. Unemployment insurance benefits are paid by the Estonian Unemployment Insurance Fund.

If you do not meet the conditions to receive an unemployment insurance benefit, or if you have exhausted your rights to a benefit, you may still qualify for the unemployment allowance. A person is entitled to a state unemployment allowance if he or she has registered as unemployed with the Estonian Unemployment Insurance Fund and has been employed or engaged in an activity equivalent to work (e.g. attended daytime studies, was raising a child under the age of eight, etc.) for at least 180 days during the 12 months prior to registering as unemployed. The allowance is calculated on the basis of a daily rate of 3.28 EUR. In the latter case the benefits are paid for up to 270 days.