Estonia

Social security contributions

Employers operating in Estonia (including non-residents having a permanent establishment [PE] or employees in Estonia) must pay social tax on certain payments to individuals at the rate of 33% (whereof 20% is used for financing public pension insurance and 13% for financing public health insurance). Social tax paid by employers is not capped and mainly applies to salaries, directors’ fees, and service fees paid and fringe benefits granted to individuals. The period of taxation is a calendar month.

The net business income derived by individuals registered as sole proprietorships is also subject to 33% social tax (capped). Sole proprietorships are required to make quarterly advance payments of social tax in fixed amounts, which are credited against the final annual social tax liability.

Unemployment insurance contributions

Employers are also required to pay and withhold unemployment insurance contributions. Employers must pay 0.8% and employees must pay 1.6% (collected by employers through payroll withholding). The contributions mainly apply to salaries and service fees paid to individuals.

Compulsory accumulative pension scheme

Resident employees born after 31 December 1982 are obligated to join the compulsory accumulative pension scheme and make 2% contributions to the scheme (mostly collected by employers through payroll withholding). The contributions mainly apply to salaries, directors’ fees, and service fees. For resident employees born before 1983, joining the pension scheme is voluntary; however, after joining, it becomes compulsory and the employees may not subsequently leave the scheme. In addition to the 2% contribution made by the employee, 4% of the social security contribution payable by the employer (33%) will be transferred to the employee’s pension account.

Employees had an opportunity to increase the pension contributions from 2% to 3% (temporarily for the period 2014 to 2017) by submitting a respective application before 15 September 2013. Where the employee opted for the increased contributions, the contribution by the state was increased from 4% to 6% on account of the employee's personal pension account.

Consumption taxes

Value-added tax (VAT)

The standard VAT rate is 22%. A reduced rate of 9% is applied to books, periodicals (with few exceptions), hotel accommodation services, and listed pharmaceuticals. A reduced rate of 5% is applied to certain periodicals both on physical medium and electronically.

The VAT rate on the export of goods and certain services is 0% (i.e. exempt with credit). Certain services, such as health care, education, insurance, certain financial, and transactions with securities, are exempt (i.e. exempt without credit).

See the Other taxes section in the Corporate tax summary for more information.

Land and property taxes

Land is subject to annual land tax that is calculated on the assessed value of land at rates between 0.1% and 1%, depending on municipality. The tax is paid by the owners of land, or sometimes by the users of land, generally in two instalments, by 1 April and 1 October. Land up to a certain size under a home is exempted from land tax.

There is no property tax (i.e. tax on the value of buildings).

Property transfers are generally subject to state and notary fees.

Local taxes

Local taxes can be imposed by rural municipalities or city councils; however, the fiscal significance of local taxes is almost non-existent. Local taxes include advertisement tax, road and street closure tax, motor vehicle tax, tax on keeping animals, entertainment tax, and parking charges.