A contribution to mandatory funded pension is a contribution calculated from the income of employees and is used for the financing of the second pension pillar.
Pursuant to § 6 of the Funded Pensions Act, the mandatory funded pension system applies only to Estonian residents. Therefore, the remuneration of a non-resident declared in Annex 2 to Form TSD is not subject to mandatory funded pension contributions.
Employers must withhold the contribution to funded pension and pay it to the Tax and Customs Board. When an employee starts work, the employer must verify the existence of the employee's funded pension contract from the Funded Pension Registry by entering the employee’s personal identification code.
In connection with the restructuring of the second pillar of the funded pension, the withholding of the payment is started and ended three times a year. 1 January, 1 May or 1 September. In this regard, employers are obliged to check the start or end date of the payee's payment obligation in December, April and August.
The contribution rate for the funded pension is 2%, 4% or 6% of the taxable remuneration. Withheld contributions must be declared in Annex 1 to Form TSD. The withheld contribution must be paid by the 10th day of the month following the month of making a payment to an employee.
More information is available on the website of the Tax and Customs Board: Contribution to mandatory funded pension.