Taxes in Europe Database v2
First Social Tax Act: passed 19.09.1990 (State Gazette, 1990, 9, 102), entered into force 01.01.1991.
Current Social Tax Act: passed 13.12.2000 (State Gazette I, 2000, 102, 675), entered into force 1.01.2001. Last amended 19.06.2014 (State Gazette I, 29.06.2014, 109), entered into force 01.07.2014.
Unemployment Insurance Act: passed 13.06.2001 (State Gazette I, 2001, 59, 359), entered into force 1.01.2002. Last amended 19.06.2014 (State Gazette I, 29.06.2014, 109), entered into force 01.07.2014.
Social security contributions will not be paid in Estonia, if the employee has a ceritificate of a posted employee (E101, A1) issued by the authorities of an EU country, or a country with which Estonia has a social security agreement (Canada, Ukraina).
1. A person, who makes payments specified in § 2 of the Social Tax Act (except business income of sole proprietor):
2. A sole proprietor on business income.
3. The state, rural municipality or city in the cases specified in § 6 of the Social Tax Act.
In case of employers`unemployment insurance payments only employment income is the base.
Social security contributions will be paid in Estonia, if the employee works in EU country, in Canada or in Ukraina and has a ceritificate of a posted employee (E101, A1) issued by the authority of Estonia.
Fringe benefits are any goods, services, remuneration in kind or monetarily appraisable benefits which are given to a person specified in subsection 48 (3) of the Income Tax Act in connection with an employment or service relationship, membership in the management or controlling body of a legal person, or a long-term contractual relationship, regardless of the time at which the fringe benefit is granted.
The social tax shall be paid at a rate of 33% on fringe benefits and also on income tax calculated on fringe benefits.
The tax base for social tax:
The tax base for unemployment insurance is employment income.
Sole proprietor has the upper limit. Social tax shall be paid on the business income of sole proprietors, but annually on an amount not more than fifteen times the sum of the minimum monthly wages for the taxable period (12x15x390)
Exempted payments and benefits are:
If social tax for a sole proprietor is also paid by his or her employer or, pursuant to § 6 of the Social Tax Act, by the state and if the person’s monthly business income is less than the minimum, the amount of social tax payable on the basis of his or her business income may be less than the amount of tax calculated on the basis of the minimum on the condition that the total amount of social tax payable for him or her by the employer or, pursuant to § 6 of the Social Tax Act, by the state on the basis of business income is at least equal to the amount of tax calculated on the basis of minimum.
The rate of social tax is generally 33 per cent of the taxable amount. The proportion of social tax transferred into the state pension insurance funds is 20 per cent and the proportion of social tax transferred into the state health insurance funds is 13 per cent. In particular cases (Art 6 Sec 1 Clauses 6, 61,8, 9, 11 and 13 of the Social Tax Act) and in the case of the unemployment insurance benefits provided for in the Unemployment Insurance Act it is 13% of the taxable amount.
The taxable period for social tax is one calendar month (except sole proprietor). The tax due date is the tenth day of the month following the taxable period.
The taxable period for social tax on the business income of a sole proprietor is one calendar year and his tax due date is the 1st October of year following the taxable period.
Estonian Tax and Customs Board.
Minimum and maximum obligation:
For employers there is a minimum obligation on social tax to be paid, which is equal to 33% of the minimum envisaged by the Social Tax Act. In 2015 the minimum is 355 € per month. The minimum social tax obligation of 117.15 € (355 x 33%) has to be paid monthly for each employee (except in the case of a person receiving a state pensions, a parents raising child of up to 3 years of age or three or more children, a pupil, a person unemployed more than 12 months and a student).
Sole proprietors pay social tax on their business income, but annually not less than the amount calculated from the minimum (355 x 12 = 4,260 € in 2015) and not more than the amount calculated from fifteen-fold minimum wage (390 x 15 x 12 = 70,200 € in 2015).
The law enacts several special cases of paying social tax when tax is paid by the state and the rural municipality or city (e.g. for parent raises child of up to 3 years of age or three or more children; for persons receiving unemployment benefit). In special cases social tax shall be paid based on the aforementioned minimum.
On 01/01/2015 (approved 26/09/2014) came into effect the lowering of unemployment insurance payment rate from 1.0% to 0.8%. Estimated effect in 2015 ca -25 mil €, 2016 ca -26 mil, 2017 ca -28 mil, 2018 ca -30 mil. Low unemployment rate and sufficient reserves allow lowering the rate and decrease tax burden of labour.
On 01/01/2015 (approved 18/12/2013) came into effect the change in fringe benefits - abolition of compensation of a car without logbook. Cash based revenue increase in 2014-2017 is ca 2.5 mil € each year. This measure is a part of a wider overhaul of company car taxation with the aim of reducing inefficiencies in tax expenditure and thereby increasing tax revenues.