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Estonia. Basic exemption and taxes in year 2019

  • Income of the year 2019 – 20%
  • Income tax of legal person in case of distribution of profit 20/80. Since 2019, for the legal persons, who are pay dividends regularly  7% is withheld from dividend payment made to natural person, both resident and non-resident, if the payer applied reduced corporate income tax rate of 14/86 to the dividend payment.
  • Period of taxation for natural persons is a calendar year.
  • Tax-free amount as basic exemption applies to all kinds of income together. In order to the basic exemption to be applied by the payer (to be deducted from taxable payment before withholding income tax from payment to resident natural person), application has to be submitted to only one payer at once by the resident natural person recipient. The amount of basic exemption to be deducted may be chosen by recipient, if smaller than the amount allowed by law. The latter is recommended if a person is not sure of the total income of the year to be earned, as some additional amount to be earned later during the year may reduce the maximum amount allowed to be deducted. Too much deduction during a year may result in obligation to pay additional income tax amount according to the annual tax return next year. Please be informed that in case of total amount of all income exceeding 25 200 EUR in a year, including dividends (exempted from income tax in Estonia) and income from abroad, there is no right to the deduction of basic exemption to be applied at all. Income of the year 2019 – up to 500 EUR in a month and up to 6000 EUR in the year, but decreasing depending on the total income amount. If total amount of all income is 25 200 EUR in a year or more, there is no right to basic exemption at all.
  • In 2018 and in 2019, an unemployment insurance premium to be withheld is 1,6% of the gross salary of an employee. In addition to this, employers pay the unemployment insurance premium at a rate of 0,8% of the amount of gross salaries monthly. In case of recipient who has become in the age of old page pension, unemployment insurance premium (1,6%) will not be withheld any more, although the part of the employer (0,8%) is still payable.
  • From 2012, a rate of a funded pension payment is 2% of the gross salary of a resident employee. Not all persons have joined the funded pension pillar. In order to get to know, if the recipient is the one who has joined, to be sure the funded pension payment has to be withheld, the payer has the opportunity to test either by entering the persons ID-code or by Mass query here http://www.pensionikeskus.ee/en/ii-pillar/for-employer/subscription-queries/. Please be informed that funded pension payment is not to be withheld from payment made to a non- esident, but the query above does not take the tax residency into account upon issuing the result.
  • Social tax is paid by employer in full and a general rate is 33% in 2019 of the gross payment. There is always a minimum obligation for social tax to be paid, in 2019, it is 165 EUR, even if there were no payments for salaried work for each employee

Source: Estonian Tax and Customs Board