Company for Business logo

Social tax

Income from employment and business is taxed with social tax to finance pension insurance and national health insurance. The social tax rate is 33% (in certain cases 13%) of the taxable amount.

The monthly underlying rate of the minimum obligation of social tax

The social tax liability minimum has been established for all social taxpayers.

In 2024 the minimum social tax obligation is based on a monthly rate of 725 euros, i.e. the minimum social tax obligation for the employer is 239.25 euros per month.

The procedure for calculating the employer’s minimum social tax obligation is established with Regulation No. 17 (Minister of Finance of March 15, 2013).

Social tax is paid by:

  • Employers, the tax is declared on the TSD declaration and paid monthly.
  • Sole proprietors from their business income.
  • Country, municipality or city, the tax is declared on the ESD tax return and paid monthly.

Self-employed social tax advance payments

A sole proprietor needs to pay social tax advance payments four times a year — by the 15th of the last month of each quarter. The final annual social tax liability of the sole proprietor is calculated by the Tax and Customs Board based on the business income declared in the company’s income declaration. The company will be sent a tax notice about the additional social tax to be paid. The deadline for payment of the additional social tax is 1. October.

Directly applicable EU law and social security agreements

Estonia appplies to the European Parliament and the Council Regulation No. 883/2004 about coordination of social security systems and its implementing regulation No. 987/2009. On the basis of Section II of Regulation 883/2004, it is determined which Member State’s legislation must be applied, if the employee is moving within the European Union (EU) or if the employer’s registered place of business is located in a different Member State than the person’s place of employment.

Competence of the Tax and Customs Board in the application of EU regulations

  • Collection of social security taxes and payments. In Estonia these are social tax, unemployment insurance contribution and in the case of Estonian residents, also accumulated pension payments into the II pillar of pension.
  • Exchange of data between Member States in matters of social insurance contributions.
  • Collection of tax debts based on requests from competent authorities of other Member States and submission of corresponding requests to other Member States.

EU rules stipulate that each person must be subject to the laws of only one country at a time. For taxation purposes, this means that income earned from working in different Member States is taxed in only one country at a time. Generally, social security taxes and contributions are paid to the country where the work is performed.

Exceptions to this general rule apply to individuals working in multiple countries simultaneously and employees posted in other countries. In such cases, social security contributions are paid in the country (known as the insurance country) whose competent social security institution has issued the certificate A1 (“Certificate concerning social security legislation applicable to the holder of the certificate”). It can be issued by the request from the person or their employer. In Estonia, the authority responsible for determining the insurance country and issuing the A1 certificate is the Social Insurance Board (SKA).

If the Social Insurance Board has issued an A1 certificate to a person, the Estonian Social Tax Act will apply. If the A1 certificate is issued by another member state, there is no social tax obligation in Estonia and the employee’s social security contributions must be paid in that country according to its regulations.

Social tax liability for a foreign employer in Estonia

If a foreign employer incurs a social tax obligation in Estonia, the employer can authorize an employee to handle the tax obligations in Estonia on the employer’s behalf (Article 21 of Implementing Regulation 987/2009)

Based on this, we would like to highlight that, depending on the specific situation, an Estonian employer who sends an employee to work abroad or hires a foreign employee in Estonia may be required to pay both income and social tax, only income tax or only social tax on the salary paid to the employee in Estonia.

If Estonia has concluded a social security agreement with a foreign country, the taxation of social tax on payments made to a resident of that country must follow the provisions of the agreement.