Changes in several tax rates and minimum wage
There are several changes in Estonian tax rates in 2017, including non taxable basic exemption for salaries and minimum obligation for social tax to be paid.
- Minimum wage (minimum gross salary for full-time employees) – 470 eur (430 eur in 2016)
- Minimum hourly wage – (minimum gross hourly salary) 2,78 eur (2,54 eur in 2016)
- Corporate Income tax rate remained same – 20% (it is 20/80 or 25% from net amount of the dividends paid out)
- Non-taxable basic exemption (which can be deducted from salary before calculating income tax) – 180 eur (170 eur in 2016) per month (NB! It can be deducted only by one employer and there has to be written application from employee).
- Social tax rate – remained same – 33% (33% in 2016).
- Minimum obligation for social tax to be paid increased to 430 eur (390 eur in 2016), this is 141,90 eur monthly which has to be paid even when there was not any salary payment for employee.
- Rate for funded pension payment is either 0%, 2% or 3% from gross salary, applicable only for Estonian resident. What is the funded pension payment rate for individual employee, you can check here: “Check funded pension payment“. There you can check also ending date of funded pension payment deduction for employees reaching retirement age.
- Unemployment tax rates did not change and are still 1,6% for employee (withheld from gross salary) and 0,8% for employer (from gross salary). The obligation to withhold an employee’s unemployment insurance premium (1.6%) ends when the employee reaches the pensionable age or on the last day of the month when early retirement pension is granted. The employer will still be obligated to pay unemployment insurance premiums at the rate of 0.8% established for the employer on wages paid to an employee who is of the pensionable age or to an employee who has been granted early retirement pension.
- Daily allowance for business trips to abroad – 50 eur. 50 eur of daily allowance (per day) can be paid to employee without income tax for the first 15 days, for longer business trips the daily allowance (starting from day 16) must not be over 32 eur. Daily allowances over this limit are taxable same as salaries (including all social taxes etc).
Important information about December 2016 salary payments
As for calculating wages and other compensation for December 2016 as well as taxes (contributions) withheld and calculated thereon, it is important to remember that, according to the cash accounting principle, if the wages for December are paid in January, the taxes and contributions must be calculated at 2017 rates and declared on the TSD form submitted for January (date of submission 10 February 2017). But if the wages for December are paid in December 2016, the calculation/withholding of taxes and contributions is subject to 2016 rates and the taxes and contributions must be declared on the TSD form submitted for December 2016 (date of submission 11 January 2017).
Minimum loan interest rate
As a general rule, loans provided to an employee have been treated as taxable fringe benefits unless the loan has had a stated interest set as 2x (twice) the interest rate of the European Central Bank applied on the main refinancing operations before 1 January and before 1 July each year. The interest rate is announced by the Estonian Bank on its website: check minimum interest rate here.
NB! Company cannot give loan to its shareholders (except if the shareholder belongs to same group), to its board members or other persons or companies to buy its shares.
Feel free to call us +372 5656 0740 if you have any questions about the Estonian Taxes (first 30 minutes free of charge).
This post is also available in: Estonian