Taxes in Estonia (2021)

Estonia is one of the smallest member States of the European Union, with a population of just over 1.3 million in 2021. However, in terms of average wages and the quality of life in general, Estonian citizens are ahead not only of their nearest neighbours – Latvia and Lithuania – but also of larger European countries, such as Poland and the Czech Republic. The economy of Estonia is stable and dynamic, and the real pride of the State is considered to be the sphere of information technologies.

Minimum wage

According to the Estonian Statistical Office, the minimum wage in Estonia in 2021 is EUR 584 per month (EUR 3.48 per hour). Compared to last year, the bet did not change. This indicator is regulated by the local law «On Employment Contracts», according to which in case of full-time employment in Estonia, every employee, including foreigners, is guaranteed a wage at least equal to the minimum level.

Pension rate

Pension tax rates will change from 2021 As of 1 January 2021, Stage II pension will be excluded from the calculation of annual, non-taxable income. No income tax applied A lifetime pension is not subject to income tax. A fixed-term pension is exempt from income tax if the recommended duration or longer period is chosen. Regardless of the method of payment, your pension will not be taxed if your disability is officially established.

Tax rate 10%

Pensions with a duration shorter than the recommended, lump-sum pension at retirement age, and if less than five years remain before retirement age, are subject to income tax. The tax rate in this case is 10 per cent.

20% tax rate (from 2021)

If a saving pension is withdrawn earlier than 5 years before reaching retirement age, its payment will be subject to income tax of 20 per cent.

Tax rates

Income tax on retention rate — 20%.
The income tax rate of a legal entity applied to dividends of profits is 20/80. The income tax rate of a legal entity, which is applied to a regularly distributed profit dividend, is 14/86, and income tax is withheld at a rate of 7 per cent in addition to dividends paid to an individual.
The amount of income tax-free depends on the income received (up to EUR 500 per month and up to EUR 6,000 per year).
The social tax rate is 33%. The monthly rate on which the minimum social tax obligation is based is 584 euros; respectively, the minimum social tax duty is 192.72 euros per month.
Social tax is levied to obtain the income necessary for State pension and health insurance, from payments made in the context of an employment or service relationship, from payments made in favour of a member of the management or control body of a legal entity, Payments made under a contract of obligations concluded for the provision of services to an individual, as well as special benefits and income tax paid from that place. In such cases, the payer of the social tax is the person who makes the payment, and the tax period is the calendar month.
Unemployment insurance rates: 1.6 per cent for the worker and 0.8 per cent for the employer.
The compulsory cumulative pension payment rate is 2 per cent.
In calculating the December 2020 payroll and other payments and calculating the taxes (payments) accrued/withheld, it should be borne in mind that taxes are calculated on a cash basis.