Taxation of salaries in Estonia from 01.01.2018

Starting from 1 January 2018, the total tax-free income for all revenues will be up to EUR 6000 a year, or up to EUR 500 per month, and, in this connection, will eliminate the additional tax-free income for pensions and benefits for accidents at work.

With an annual income of up to € 14,400 in 2018, the tax-free income is € 6,000 per year, with an annual increase of € 14,400 to € 25,200, the tax-free income will decrease according to the formula 6000 – 6000 ÷ 10 800 × (amount of income – 14 400), with an annual income of over € 25 200 tax-free income 0

Annual income includes all kinds of taxable income:

• remuneration and other remuneration
• service charge received under the law of obligations
• business income
• benefits from the transfer of property
• lease and rental income
• royalties
• interest
• dividend
• taxable pension
• subsidy
• scholarship
• bonus
• compensation or other income
• remuneration and other remuneration received abroad
• dividends not subject to income tax in Estonia
• dividend or equity outflow from an Estonian company, which is taxed at company level
• the amount of tax deducted on the basis of the Business Taxation Tax Act, which is reduced by the social tax on business income tax

Annual income does not include:

• sale of used personal items
• grants paid by the Ministry of Social Affairs – child allowance, family allowance, subsistence benefit
• tax-free scholarship
• sale of real estate, which was a permanent residence
• livelihood
• gifts
• special benefits
• daily subsistence allowance
• Work Ability Assistance, etc.

Tax-free income statement

Tax-free income can only be applied to one employer (tax deduction) on the basis of a person’s application. A worker who works in several jobs must be aware that he or she has the right to apply tax-free income to only one job.

An employed pensioner who receives both a pension and a salary of less than EUR 500 has the right to apply tax-free income in two places and to file a petition for both the employer and the Social Insurance Board. It is important to keep in mind that an employed pensioner can divide the tax-free income of 500 euro between the employer and the Social Insurance Board.

It is recommended to submit one application for the whole year. In the case of variable income, the application may also be amended or reversed once a month so that the tax-free income is taken into account in a smaller amount or not taken into account at all.

Implementation of tax-free income on a monthly basis and on a yearly basis

The taxpayer can receive tax-free income on a monthly basis. The amount of tax-free income is calculated according to the gross salary or other remuneration of the employee. It must also be taken into account that if the income from several sources of income, such as salary, pension or other income exceeds 1200 euros per month, the monthly tax accounting does not give the same result as the annual tax calculation.

If the tax-free income is applied on a monthly basis in a larger amount, if the income allows, then a person must pay income tax on the income tax return.

Taking into account tax-free income can be checked during the year under the heading “Working and Disbursements” → ” My Income  ” in the e-Tax and Customs Board