The general principles of the Estonian tax system are estbalished with the Taxation Act.
The Estonian tax system consists of national taxes and local taxes. National taxes are paid into the state budget, while local taxes are paid into the local government budget.
- income tax;
- social tax;
- land tax;
- gambling tax;
- value added tax (VAT);
- customs duty;
- excise duties;
- heavy goods vehicle tax.
State taxes are established by tax law.
A natural person pays income tax on their income from which deductions permitted by law may be drawn. The taxation period is a calendar year and the tax return has to be submitted by 31 March. This term may vary for non-residents.
Companies pay income tax on income distribution. Income tax liability does not arise until profit is distributed or business-related payments are made. Income and social taxes are paid by the person who grants fringe benefits, not by the person receiving them, i.e., the employer pays the taxes. The taxation period is a calendar month. Income tax is calculated by multiplying the net payment by the number 21/79, which substantially equals the income tax rate of 21% of one's gross income.
Land tax is paid by land owners, in some cases also land users. Land tax is calculated and tax notices are sent by the Tax and Customs Board.
Social tax is paid by the employer and sole proprietor. The taxation period for employers is a calendar month and for sole proprietors the calendar year. The social tax rate is 33% of payments.
The Value Added Tax Act is based on Directive 2006/112/EC of the Council of the European Union. The value added tax rate is 20%, but rates of 9% and 0% may also apply. The taxation period is a calendar month.
All of the EU's income tax and VAT directives designed to avoid over and double taxation have been introduced into national law.
Natural persons registered in the population register as well as businesses registered in the Commercial Register do not have to register separately as taxable persons with the tax authority. Registration as a person liable to value added tax can be done with the tax authority or through the Commercial Register or a Notary Public. Registering foreign businesses as persons liable to value added tax in Estonia can be read about from the following websites:
Submitting your tax declaration
Business taxpayers can file, view and correct their tax returns electronically using the e-Tax Board. They can also use it to view their tax account balances and VAT returns, and submit VAT refund applications.
For each of their employees, Estonian employers are required by law to pay social tax. The social tax rate is 33% of the taxable salary. 20% of it is allocated for pension insurance and 13% for health insurance. Social tax can be calculated, filed, and paid electronically by using the e-Tax Board.
The Tax and Customs Board website includes a Tax Calendar which details deadlines for statements and taxes, both for sole proprietors and legal persons.
Further information about the payment of taxes is available from the Tax and Customs Board.