The year 2020
has passed and it is time to take a look at the new year. What will 2021 bring
to the world of taxes? Leinonen's advisers have prepared a brief overview of
the most important tax changes, some of which were enforced in 2020 while
others will become applicable in 2021.
There are no
changes to the tax rates applicable in Estonia, which means that all tax rates
applicable in 2020 will remain in force.
An overview of
applicable tax rates (tax rates in
Estonia as of 2021)
processors, however, should note that as of 1 January 2021, the monthly rate
serving as a basis for the minimum social tax obligation is 584 euros
instead of the current 540. Therefore, as of new year, the minimum social tax
obligation is 192.72 euros per month and there is an obligation
to check whether the person has joined the second pillar pension.
pension becomes voluntary as of 1 January 2021. This means that those who had
not joined the second pillar can now do so and all second pillar owners can
suspend contributions or leave the pillar altogether and withdraw the money.
More information on the new options can be found here.
In relation to
the changes to the second pillar pension, employers must take into
consideration the increased administrative burden, as in the future, there is
an obligation to regularly check whether a person has joined the second pillar
Temporary work for the unemployed
people were given the opportunity to engage in temporary work last year. As of
1 September 2020, people who have registered as unemployed can remain
registered and engage in temporary work for up to eight days per month. This
enables the unemployed to try a new profession or participate in short-term
projects (e.g. to give lectures or write articles) without having to cancel
their registration as unemployed.
information on the rules can be found here.
The one-off payment or total payment for temporary work must not exceed 233.60 euros.
Income Tax Act and Taxation Act
As of 1 January
2021, foreign temporary employment agencies that provide non-resident workers
to Estonian companies must consider that they are obliged to pay tax in
Estonia. Prior to 2021, it was possible for a situation to occur in terms of
certain constructions, where an Estonian company rented non-resident employees
from a foreign temporary employment agency who performed work in Estonia while
no taxes were paid on their remuneration in Estonia or the foreign country. As
a result, a tax amendment was adopted in order to avoid unfair competition
between domestic and foreign labour force.
As of this year,
taxation provisions related to the use of foreign temporary workers came into
force, according to which, from the perspective of taxation, it is no longer
important who pays the remuneration, but who, in economic terms, covers the
labour costs related to working in Estonia. In other words, as the temporary
employee's labour costs are covered by the Estonian user undertaking via a
service fee invoice, the costs are borne by the temporary employment
agency. Additionally, in such a case, the
remuneration of a non-resident temporary employee working in Estonia must be
taxed as of the day they commenced work in Estonia. Therefore, a
non-resident company that offers temporary workforce or mediates temporary
workers to an Estonian user undertaking for performing work in Estonia is
1) register as a
non-resident payroll tax payer with the Tax and Customs Board. Leinonen's
advisers can register you on your behalf;
2) enter their
employees who are going to work in Estonia, even for a short term, in the
3) withhold all
labour taxes from remuneration and declare them as of the day of commencement
of the work, i.e. the first day in Estonia. Upon the existence of an A1 social
insurance certificate of another member state, the social tax and contributions
of a non-resident employer and temporary worker do not have to be paid in
accounting team can help you with both registering employees and future wage
Estonian companies who use the services of foreign temporary employment
agencies bear in mind?
Earlier, it was
planned for non-resident temporary employment agencies and resident user
undertakings to be jointly and severally liable in terms of the tax obligation
incurred in Estonia, but luckily this was abandoned. According to the law
enforced, the user undertaking and the non-resident are not jointly and
severally liable for meeting the obligation to withhold income tax, but the user
undertaking has to check with the tax authority whether the non-resident
temporary employment agency has fulfilled their obligation to register with
the Tax and Customs Board. Failure to fulfil the checking obligation may be
punishable with a fine of up to 32,000 euros.
several cross-border trade-related amendments planned in terms of the
Value-Added Tax Act as of 1 July 2021, more information on which can be found
here (VAT changes as of 2021).
Excise duty on tobacco
From 1 December
2020 to 31 December 2022, tobacco liquid with and without nicotine is not
regarded as an alternative tobacco product and is not taxed with the tobacco
The applicable excise duty rates are available here.
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