Social tax in Estonia

Estonian legislation defines Social (Security) Tax as financial obligation imposed on taxpayers in order to secure revenue for pension insurance and state health insurance. Social tax shall be paid on following:

• Wages and other remuneration paid to employees in money;
• Wages and other remuneration paid to public servants;
• Remuneration paid to members of the management or controlling bodies of legal persons;
• Business income of sole proprietors;
• Remuneration paid to natural persons on the basis of contracts for services, authorization agreements as well as contracts under the law of obligations entered with the purpose of provision of other services;
• Fringe benefits;
• Benefits paid pursuant to the Estonian unemployment remuneration system;
• Any other work remuneration paid in accordance with Estonian legislation.

Social tax is paid on wages and remuneration received by the employees for every particular month. Yet it is important to notice that there is a minimum monthly wage rate established by the state budget for the budgetary year, and it cannot be less than minimum wage established for the year. Certain exceptions also consider the period of taxation for persons receiving a state pensions, employees and public servants with suspended employment contracts or working part-time. A sole proprietor is required to pay social tax annually on a minimum amount of monthly rates established by the state budget.

Following persons are subject to social tax:

• Resident legal person;
• Natural persons;
• Non-residents having a permanent establishment in Estonia;
• State, rural municipality and city authorities.

The current rate of the social tax in Estonia is 33% of the taxable amount. There are exceptions considering persons receiving unemployment or social benefits, leaving tax rate at 13%.

Tony Koivula, lawyer of the Gencs Valters Law Firm in Tallinn.

Practising in fields of Tax Law in Latvia, Lithuania, Estonia .

T: +372 61 91 000 

F: +372 61 91 007

tony.koivula@gencs.eu