Tax rates and amount of tax-free income in 2016 in Estonia
Starting 01.01.2016 there will be new tax rates.
– The rate for withholding income tax is 20%.
– Income exempt from tax is 2040 euros per year, 170 euros per month.
– Additional income exempt from tax in the case of pensions is 225 euros per month.
– Additional income exempt from tax in the case of occupational accident or occupational disease compensation is 64 euros per month (for the implementation of which an application from the person receiving the payment is required).
– The social tax (paid by employer in full) rate is 33% of the gross payment per month.
– The monthly rate on which the minimum social tax obligation is based is 390 euros i.e. the minimum obligation of social tax is 128.70 euros per month.
– The unemployment insurance premium tax is 1.6% for the employee and 0.8% for the employer of the amount of gross salaries monthly.
– The funded pension tax rate is either 2% or 3% of the gross salary of a resident employee.
– The tax exempt limit of the foreign assignment daily allowance is 50 euros for the first 15 days of the foreign assignment, however for 15 days in a calendar month at most and 32 euros for every following day.
– Daily allowance paid over the tax-free limit is deemed to be wages and will be taxed as salary.
Income Tax Act changes starting 01.01.2015
On the January 1, 2015 the Income Tax Act changes took effect and it states that the circumstances about income tax exceptions and reduction must be declared in tax return on an ongoing basis. If until recently the company had to declare unused rights for income tax benefits only when making the disbursement and pay-out, then from now on the declaration about possible income tax reduction must be submitted to the Tax and Customs Board on the month following the date the circumstances took place. This rule applies also to the mergers and divisions of the companies and therefore rights aquired or received during the reorganization should be reflected in tax return for the month when the merger or division enters into force.
Additionally all monetary or non-monetary contributions and investments to the company must be declared in order to receive income tax benefits from the distribution payment in the future. The income tax exemptions can be applied in case of distribution of profit and other payments from the capital, for example in case of ordinary liquidation or alternative merger of company and natural person, and decrease of share capital.
Declarations regarding before mentioned circumstances should be submitted at latest on February 10, 2015. Otherwise payments to the company in the past can not be legal ground for income tax benefits in the future.
It would be good to know that documentation to receive income tax benefits must be in writing and already submitted declarations can be amended and changed until 3 years.
If you have any questions or you need assistance, please do not hesitate to contact us.