- Social tax compensation for a person with decreased working ability
- Social tax for sole proprietors (FIEs)
Revenue from social tax is used to fund pension insurance and state health care. Social tax is to be paid by an entrepreneur (employer) for an employee.
The social tax rate is 33% of the employee’s gross earnings (for instance, in the case of 1,000 euros in gross earnings, you pay 330 euros of social tax for the employee).
The taxation period is a calendar month and by the 10th of the subsequent month, you will have to declare and pay social tax to the Tax and Customs Board. A declaration can be submitted electronically at e-Tax and Customs Board or by contacting the Tax and Customs Board’s regional tax centre.
An employer is required to pay social tax on wages as well as on fringe benefits. In some special cases, social tax is paid by the Estonian state – for instance, for various persons who receive caregiver support and families with many children. Social tax is paid by the state for employees, whose loss of capacity for work has been assessed as 40% or more.
An employer who employs an employee with decreased working ability (who is established as having partial or no working ability or at least 40% permanent incapacity for work) can apply for a social tax incentive from the Unemployment Insurance Fund.
The state will continue to pay social tax for an employee with decreased working ability via the fund pursuant to the monthly rate (430 euros in 2017).
An employer pays social tax for an employee with decreased working ability on the amount of remuneration that exceeds the monthly rate which forms the basis for the calculation of the social tax paid by the fund. If the actual remuneration of the employee is lower than the monthly rate (e.g. they are employed part-time), the fund will still pay the social tax calculated on the monthly rate.
The state pays social tax if the employer is a company, non-profit association, foundation or sole proprietor and the employee is working for the employer under an employment contract.
The state does not pay social tax for those with decreased working ability who receive remuneration under a contract for services, authorisation agreement or any other contract under the law of obligations.)
As a sole proprietor (FIE), you are required to pay social tax on business income. The social tax rate for a FIE is 33% of business income.
Unlike companies, the taxation period for FIEs is a calendar year, as the taxable income is determined once a year on the basis of the income tax return. When you operate as a FIE, you are required to pay social tax as advance payments four times a year by the 15th of each quarter. If your income is sufficiently high for the year, the Tax and Customs Board shall send a tax notice regarding an additional amount of social tax to be paid.
The Tax and Customs Board shall refund the overpaid amount of social tax by 1 October of the year subsequent to the taxation period.