Taxes and tax system
The Estonian tax system is made up of state and local taxes. A tax is a monetary obligation imposed on the taxpayer, which is subject to performance pursuant to the procedure, in the amount and within the terms prescribed by law. Taxpayers are required to pay only such state and local taxes as are prescribed by law.
State taxes are received in the state budget. A part of personal income tax and land tax in full amount is received in the budgets of local governments. Local taxes are received in the budgets of local governments.
- income tax
- social tax
- land tax
- gambling tax
- value added tax
- customs duty
- excise duties
- heavy goods vehicles tax
Local taxes are established by a regulation of the rural municipality or city council in accordance with the terms and conditions laid down in the Local Taxes Act.
- sales tax
- boat tax
- advertisement tax
- road and street closure tax
- motor vehicle tax
- animal tax, entertainment tax, parking charge
Income tax is paid by resident natural persons on all of their income, irrespective of the place (country) where it is earned. The period of taxation is a calendar year, and the basic exemption in 2016 is EUR 170 per month and the rate is 20%.
The income tax rate applicable to legal persons in 2016 is 20/80.
If a person wishes that the basic exemption during the calendar year would be taken into account in calculation of the income tax withheld from his/her wages or other income, he/she must submit a relevant application to the payer in writing and in free form. The basic exemption can simultaneously be (during the same month) taken into consideration only at one payer (for example, the employer).
Parents or maintenance providers of children can use an additional basic exemption (1,848 euros) starting with the second child if the child has no taxable income or if the income is smaller than the amount of the basic exemption.
Furthermore, an additional basic exemption applies to the state pension (2,700 euros) and compensation for an accident at work or an occupational disease (768 euros). Pension recipients need not submit an application to have the additional basic exemption that applies to their pension taken into account. In the case of compensation for an accident at work or an occupational disease, a written application must be submitted to the payer to have the additional basic exemption taken into account.
Read more about income tax on the homepage of the Estonian Tax and Customs Board.
Social tax is paid for the purpose of receiving the income necessary for state pension and health insurance from the payments made during employment and service relationships, payments made to the member of the management or control body of a legal person, payments made to a natural person on the basis of a contract under the law of obligations entered into for the provision of a service, also from fringe benefits and the income tax paid on them. In the aforementioned cases, social tax is paid by the payer, and the period of taxation is a calendar month. In general, social tax is paid at the rate of 33% on wages actually paid, but for each employee, social tax is payable on at least the monthly threshold established by the state budget, which is EUR 390 in 2016.
Read more about social tax on the homepage of the Estonian Tax and Customs Board.
Land tax is a state tax received in full amount in the budget of the local government where the land is located. The amount of land tax is calculated by multiplying the taxable value of the land by the land tax rate. The whole land is subject to land tax. Land tax is paid by the owner of the land, in certain cases also by the user of the land. There are two types of land tax incentives:
- incentive arising from the person of a taxpayer (for example, pensioners, repressed persons);
- incentive arising from the intended purpose of land or the restrictions imposed on the use of land (for example, area under cultivation and natural grassland, also the land where economic activity has been restricted).
Read more about land tax on the homepage of the Estonian Tax and Customs Board.
Heavy goods vehicles tax is imposed on a truck and a road train with a maximum permissible mass of 12 tons or more intended for the transport of goods. The taxable period for heavy goods vehicles tax is a quarter. A truck or a road train (heavy vehicle) is subject to a tax depending on the maximum permissible mass or the maximum mass, number of axes and type of the suspension of driving axle. The heavy goods vehicles tax is not imposed on heavy vehicles of the Defence Forces and the National Defence League, police authorities and rescue service agencies, and heavy vehicles of local governments, non-profit associations, foundations or economic operators that are engaged in rescue work and use the vehicles mainly for rescue work.
The standard rate of value added tax in Estonia is 20% of the taxable value of a good or service, the rates of 9% and 0% are also applied.
Customs duty is a state tax imposed by European Union legislation that a person or company must pay when goods are imported from third countries to the European Union (import duty) or exported to third countries from the European Union (export duty). In the European Union, there are no import or export duties or any similar taxes between the Member States and common customs tariffs are adopted in relatons with third countries.
Gambling tax is paid by organisers of gambling. The period of taxation with gambling tax is the calendar month. In the event of organising a tournament of a game of chance, the period of taxation is the period during which one tournament of a game of chance is organised, starting on the first day of accepting the participation fees set out in the rules of tournament of the game of chance and ending on the day when the acceptance of participation fees set out in the rules of tournament of the game of chance is terminated. In the event of organising a commercial lottery, the period of taxation is the period during which the commercial lottery is organised, starting on the first day set out in the rules of the game for placing bets and ending on the final day for distributing winnings as set out in the rules of the game.
Excise duties in Estonia are imposed on alcohol, tobacco products, fuel, electric energy, and packaging. Excise duties are mainly regulated by the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act (ATKEAS) and the Packaging Excise Duty Act. Read more about excise duties on the homepage of the Estonian Tax and Customs Board.