Starting 1 January 2024, the minimum monthly wage in Estonia is 820 euros and the minimum hourly wage is 4.86 euros (in 2023, the minimum monthly wage was 725 euros).
Under a memorandum of intent by the Ministry of Economic Affairs and Communications, the Estonian Trade Union Confederation and the Estonian Employers’ Confederation, it is planned to raise the minimum wage gradually until 2027. The minimum wage should rise to 42.5% in 2024, 45% in 2025, 47.5% in 2026 and 50% in 2027 of the average wage. The exact amount of the minimum wage is agreed by the partners every autumn based on the latest forecast from the central bank, and the Government of the Republic then approves the rate.
The changes in the Estonian minimum wage over the years can be viewed here.
The minimum social tax obligation in Estonia is the same for everyone. The minimum social tax obligation is linked to the minimum wage in effect in the previous calendar year, which is why the basis for calculating the minimum social tax contribution will be 725 euros in 2024 (increase from 654 euros in 2023). The minimum social tax obligation starting 1 January 2024 will therefore be 239.25 euros per month.
Unemployment insurance premiums will remain the same (until the end of 2026): 1.6% for employees and 0.8% for employers.
Verification of whether a second pillar funded pension contribution has to be paid from the employee’s gross wages must be made three times a year: in April, August and December. The check is necessary to know whether the pension contribution must be withheld or not (it became possible to leave the second pillar in 2021).
The standard rate for the second pillar contribution is 2% of gross wages, but starting in 2025, the employee can select 4% or 6% as the payment (employees can make this application until 30 November 2024).
For more information see here.
Effective 1 January 2024, the standard VAT rate will be 22% instead of 20%.
Until 31 December 2025, the 20% rate can still be applied to written contracts concluded before 1 May 2023 for selling goods or providing service if the contract specifies that the goods or service are to be taxed at the 20% rate and the contract does not provide for a change in price due to a potential change in the VAT rate.
There are also special provisions for taxable persons with cash-based (as opposed to accrual-based) VAT accounting policies.
Examples provided by the Tax and Customs Board on how the tax rate changes are to be applied here.
Starting 1 January 2025, Estonia has 0%, 9%, 13% and 22% VAT rates.
On 1 January 2025, a 13% VAT rate will be charged on accommodation services (including accommodation services with breakfast) instead of the previous 9% rate.
On 1 January 2025, the VAT rate on periodicals will again rise to 9% from the previous 5%.
There are also special provisions regarding these changes governing taxable persons with cash based VAT accounting policies.
Starting 1 January 2024, the average retirement pension will be 776 euros a month (it was 704 euros in 2023), and the basic income tax exemption on the retirement pension will be 9312 euros per year. That means that 20% income tax will be withheld on the part of the retirement income exceeding 776 euros a month.
From 1 January 2025, the basic exemption will change and a uniform basic exemption of 700 euros a month – 8400 euros per year – will come into effect. An exception is that the basic exemption for pensioners will be equal to the average retirement pension.
Staring 1 January 2025, the 20% income tax rate for natural and legal persons will rise to 22%. The income tax on legal persons will be calculated at a rate of 22/78 instead of the existing 20/80 and the rate on advance income tax payments from credit institutions will rise from 14% to 18%.
Starting 1 January 2025, the discounted rate on regularly distributed profits (14%) and the related 7% income tax rate withheld on dividends paid to natural persons will be discontinued.
Starting 1 July 2023, the procedure for payment of sickness benefits reverts to the pre-pandemic system. The employer pays the employee sickness benefits for the day 4 to day 8 of illness at a rate of 70% of the employee’s average earnings during the last six months. From day 9 of the illness, injury or quarantine, the sickness benefit is paid by the Health Insurance Fund.
The sickness benefit paid by the employer is subject to income tax in its entirety, but partially social tax exempt – the employer can decide to pay the employee a sickness benefit subject solely to income tax for day 2 to day 8 of illness at a rate of up to 100% of the employee’s average earnings. Such a benefit is social tax exempt if the employer pays the sickness benefit on the basis of a sick leave certificate drawn up in the required manner.
For more information on taxation of the sickness benefit, see here.
Starting 1 January 2024, an additional exemption for children and spouse can no longer be claimed nor may home loan interest be deducted. These deductions can no longer be made in declaring income in 2025.
Starting 1 January 2025, resident natural persons can deduct 8400 euros annually from their taxable income as the basic exemption. The progressive income tax exemption system will thus be ended and all taxpayers will have an identical 700-euro monthly income tax exemption, other than in the case of pensioners, whose exemption is the same as the average retirement pension. The basic exemption applies to all residents of Estonia and the European Economic Area (EU member states, Norway, Iceland and Liechtenstein) regardless of the amount of earnings.
Starting on 1 October, general construction contractors and construction sub-contractors must register the contracting chain and duration of work in the Tax and Customs Board’s employment chain and duration of employment database (requirement based on Section 2510 and following sections of the Taxation Act).
Information regarding the building to be constructed, the construction work, the customer and subcontractors performing the work and persons present on the construction site must be filed to the Tax and Customs Board.
The registration obligation applies to construction work expected to last more than 30 working days and where at least 20 people are working simultaneously on the job site, or if the construction works have an expected volume of more than 500 worker-days (full work days).
Online platforms must file information in the Tax and Customs Board’s e-services environment on both the persons operating via the platform and income earned by them.
For the purposes of requirements on the exchange of information, a platform is software that enables the seller to be in contact with other users to engage in activities covered by the reporting obligation, as well as an arrangement for collection and payment of the fees related to such activities (Section 2020 of the Tax Information Exchange Act).
The reporting obligation covers the following activities:
The information must be filed to Tax and Customs Board regarding taxable persons of Estonia and other member states and the reporting obligation arises regarding persons who conduct at least 30 transactions and/or receive a payment of more than 2000 euros for the sale of the item.
Data on income earned via the platform must be sent to the tax authority for the first time concerning 2023 and the deadline is 31 January 2024.
More information: Section § 2020 and following sections of the Tax Information Exchange Act.
https://www.riigiteataja.ee/akt/129122022028
https://www.emta.ee/uudised/platvormide-kaudu-teenitud-tulu-kohta-hakatakse-mta-le-andmeid-edastama
In connection with the new land value assessment system that came into force in 2022 (assessment will henceforth be register-based and regular), property tax will rise up to 10% a year starting in 2024. Up to now the property tax amount was stable from year to year, but from 2024 on, one must be attentive to paying property tax and recognizing it in accounting.
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