Estonia - Tax Guide for Freelance Contractors
Welcome to our guide to Taxation in Estonia. You will find a wealth of information which will be useful if you plan to work in, or place consultants in, Estonia.
Our tax guides give a general overview of the actual taxation rates and rules at the time of writing. There are of course many ways to legally reduce tax or social security burdens in Estonia. Please contact us for more information or an actual breakdown of your situation, and to find out more about our range of payroll and contact management services in Estonia.
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Estonian Income Tax
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Tax residents in Estonia: are liable to pay Estonian tax on their worldwide income,
Non tax residents in Estonia: are liable to pay tax on Estonian-source income only.
Individuals will be regarded as tax residents:
- if they have a permanent place of residence in Estonia, or
- if they remain in Estonia for 183 days or more during a 12-month period, or
- if they are individual employed in the public service of Estonia and sent abroad.
Married persons may file a joint tax return:
Taxable income includes:
- employment income,
- business income,
- gains from the transfer of property,
- rent and royalties,
- dividends and interests.
Certain deductions and allowances are permissible for 2012 including:
- a personal allowance of EUR 1'728. For children under age 18, one of the parents is entitled to a personal allowance of the same amount if the child does not work,
- interest payments for loans for the acquisition or reconstruction of a house or apartment,
- unemployment insurance contributions,
- personal educational expenses for dependents under 26 years,
- premiums paid to qualifying pension schemes and funds are deductible up to 15% of the individual's taxable income.
Deductions are only granted to residents of other EEA countries who file a tax return in Estonia and (1) have received at least 75% of their taxable income for the tax year from sources in Estonia or (2) have proved that they cannot use the personal deductions or allowances intended for residents in any other country, where the 75% threshold has not been reached.
Income tax rates for 2012
- 21.00% flat tax rate.
The employer deducts tax at source from the gross salary.
Tax returns should be submitted by 31 March of the following year.