Updated on: 2025/08/04 14:03 (UTC)
Overview
Estonia, which officially is known as the Republic of Estonia, is a parliamentary democracy located in northeastern Europe. Estonia is bordered by Latvia to the south, Russia to the east, the Baltic Sea to the west, and the Gulf of Finland to the north. In addition to its mainland on Europe, Estonia includes hundreds of islands, the largest and most populous of which are Saaremaa and Hiiumaa, both of which are to the west of the mainland and at their closest points to the mainland are about 25 kilometers afar.
Estonia consists of 15 first-order administrative divisions known as linnad, or urban municipalities, and 64 first-order administrative divisions known as vailad, or rural municipalities.
Estonia’s currency is the euro.
Employers in Estonia are responsible for withholding income taxes and social taxes from employees’ paychecks. Employers must also contribute to social security and uphold laws relating to compensation and benefits.
Foreign workers in Estonia generally are subject to the same tax and labor laws as Estonian nationals. Foreign workers in Estonia pay taxes on their Estonian sourced income while Estonian nationals pay taxes on their worldwide income.
Estonia is a member state of the European Union.
Estonian residents working in the United States are covered by U.S. tax law with possible treaty and work status exclusions applying. Work within the U.S. states and territories is covered by various labor laws.
CURRENCY DETAILS
The currency of Estonia is the euro (€), which Estonia uses because it is part of the euro area, also known as the eurozone, which is a group of countries that adopted the euro as their currency. The internationally recognized three-letter currency code for the euro is EUR, which also is one of the currency’s two commonly used currency symbols. The English plural form of euro officially recognized by the European Commission is the same as its singular form, although in common English parlance the plural form is euros. In Estonian, the plural form of euro is euroa or eurot, depending on context.
When an amount of euro is written using the currency symbol € in accordance with the European Commission’s standard placement treatment of the symbol, which is the placement treatment used for the English language, the symbol precedes the numerical value with no space between the numerical value and symbol. When an amount of euro is written in Estonian using the currency symbol €, the symbol follows the numerical value with a space, or sometimes no space, between the numerical value and symbol.
When an amount of euro is written using the currency symbol EUR, the symbol precedes or follows the numerical value with a space or no space between the numerical value and symbol.
One hundredth ( 1 ⁄ 100 ) of a euro is referred to in English as a cent and the English plural form of cent officially recognized by the European Commission is the same as its singular form, although in common English parlance the plural form is cents. In Estonian, one hundredth of a euro is referred to as a sent, with the plural form of senti.
When amounts of euro are written in Estonian, the comma that in English separates the thousands place from the hundreds place instead is rendered as a dot (.) or as a space, and the dot that in English separates the ones place from the tenths place instead is rendered as a comma.
TAXES
Estonia’s national government enacts laws regarding income tax and social tax.
The fiscal year in Estonia is the calendar year, from Jan. 1 to Dec. 31.
Coronavirus (Covid-19) Guidance: The minimum monthly tax base for social taxes was suspended for wages paid in March, April, and May 2020, and social taxes were to be calculated based on the actual wages paid to the employee.
In October 2020, employees could apply to waive the 2% employee pension contribution, effective from Dec. 1, 2020, to Aug. 31, 2021.
Nonresident employees who were working in Estonia for an employer without a presence in Estonia for less than 183 days before the start of Estonia’s state of emergency, but cannot leave because of movement restrictions, are considered subject to income tax in Estonia only if they remain in the country after the end of movement restrictions.
Nonresident employees who normally work in Estonia, but are working from home in another country, are not subject to Estonian income tax while working from home because the work is not considered to be performed in Estonia. Estonian residents who normally work in another country, but are working from home in Estonia, are considered to be working in the normal work country while movement restrictions are in effect.
According to European Commission guidance, employees who normally work in one European Union member country and live in another are still considered to be insured by the social insurance system of the normal work country while working at home.
Income Taxes
Estonia’s Income Tax Code is administered by the Tax and Customs Board of Estonia and the Financial Supervisory Authority.
Coverage: All individuals are covered for income taxes. Individuals are considered residents of Estonia for tax purposes if they spend 183 days or more in Estonia within a 12 month period or if they have a permanent home in Estonia. Residents are liable for income tax on worldwide income while nonresidents are liable for paying income tax on Estonian sourced income.
Employees: According to the income tax law, income tax is charged on an individual’s remuneration or any fees paid on the basis of a contract for services. An employee is defined as a person employed under an employment contract.
Rates and Thresholds: Estonia assesses a flat personal income tax rate of 20%.
Effective since Jan. 1, 2018, employees with annual income of up to €14,400 are entitled to treat €6,000 as exempt from personal income tax, employees with annual income of more than €14,400 and less than €25,200 are entitled to treat an amount of their annual income as exempt from personal income tax with the total amount exempt this way decreasing as income increases, and employees with annual income of at least €25,200 are not entitled to treat part of their income as exempt from personal income tax.
Employers are responsible for paying income tax on any fringe benefits they provide to employees.
Registration: Generally, taxpayers operating as employers must register with the Commercial Register online with the e-Business register. Any taxpayer registered with the Estonian Commercial Register is automatically recorded with the Estonian Tax and Customs Authority. Taxpayers not registered with the Commercial Register, such as employees, must be registered with the Tax and Customs Board. Employers are responsible for registering those they employ by submitting the information listed on the Tax and Customs Board website.
Taxable Amounts: Taxable income includes all income from employment, including salaries, wages, bonuses and other remuneration, business income, interest, royalties, rental income, capital gains, pensions, scholarships (except scholarships financed from state budget), payments for sick leave, and unemployment insurance.
Withholding Methods: Income tax must be withheld from an employee’s pay at the time of payment at the flat rate of income tax.
Returns and Remittance: Employers must submit returns and make remittances monthly by the 10th of the month following the month in question to the Tax and Customs Board of Estonia using form TSD. Annual income tax returns are due Feb. 15 following the year of taxation in question.
Employee Share Plans: According to the Estonian Tax and Customs Authority, there is no specific legislation in regards to the taxation of gains from an employee share plan. However, part of the Income Tax Code covers any shares given by employers to employees at a discounted rate or for free. Gains from the transfer of these shares are liable to income tax as a fringe benefit, which the employer must pay.
Recordkeeping: Tax records generally must be kept for a minimum of seven years.
Penalties: If an individual fails to submit a tax return or submits false information, he is subject to a fine of up to €32,000.
Social Taxes
Social taxes are administered by the Ministry of Social Affairs in Estonia and collected by the Tax and Customs Board. Several branches are responsible for the administration of specific aspects of social security, including the Social Insurance Board, the Health Insurance Fund, and the Unemployment Insurance Fund. Employers must remit all taxes for pensions, health insurance, and unemployment insurance to the board. Social insurance covers pensions, health insurance (including maternity and sickness payments), and unemployment insurance.
The pension scheme in Estonia is made up of three pillars: a state-funded scheme, a compulsory pension scheme, and a voluntary pension scheme. All individuals born after 1983 are required to contribute under the compulsory pension scheme.
Coverage: Individuals covered by the social security law include residents of Estonia and individuals who have a permanent home in Estonia.
Rates and Thresholds: Estonia’s social taxes assessed on employers and employees are subject to a minimum monthly tax base. If an employee’s compensation for a month was less than the minimum monthly tax base, the employee’s compensation for the month would be treated as having been the minimum monthly tax base for calculations of the social taxes assessed on the employee and employer.
Effective for 2021, the minimum monthly tax base is €584. Effective for 2020, the minimum monthly tax base was €540.
Employers are assessed a social tax contribution rate of 33% of the total amount paid to employees, consisting of a pension fund rate of 20% and a health insurance fund rate of 13%. The pension fund rate of 20% itself consists of a pension insurance rate of 16%, and 4% transferred by the state to the employee’s account.
Effective for 2021, based on multiplying the minimum monthly tax base of €584 by the employer social tax contribution rate of 33%, an employer’s minimum social tax payment per month is €192.72 multiplied by the number of workers employed by the employer. Effective for 2020, based on multiplying the minimum monthly tax base of €540 by the employer social tax contribution rate of 33%, an employer’s minimum social tax payment per month was €178.20 multiplied by the number of workers employed by the employer.
Employees are assessed a mandatory pension fund contribution rate of 2% of their employment income. Effective starting Nov. 6, 2020, employees may apply to suspend employee pension contributions and cannot resume contributions until 10 years after contributions are stopped. Applications filed from Dec. 1 to March 31 stop contributions the following Sept. 1; applications filed from April 1 to July 31 stop contributions the following Jan. 1; and applications filed from Aug. 1 to Nov. 30 stop contributions the following May 1.
Employers are assessed an unemployment insurance contribution rate of 0.8% of the total employment income paid to employees and employees are assessed an unemployment insurance contribution rate of 1.6% of their employment income.
Registration: Employers must register employees for social insurance within seven days of the employee beginning work. Information submitted when registering for income tax with the Tax and Customs Board is transferred to the social security administrative branches.
Withholding Methods: Social taxes must be withheld from an employee’s paycheck at the time of payment.
Taxable Amounts: All income, including wages, salaries, other remuneration, cash in kind, and fringe benefits are subject to social taxes.
Returns and Remittance: Employers must submit returns and make remittances monthly for social taxes by the 10th of the following month to the Tax and Customs Board of Estonia. Social tax returns and remittances are combined with income tax returns and remittances, using form TSD.
Recordkeeping: Tax records generally must be kept for a minimum of seven years.
Penalties: If an individual fails to submit a tax return or submits false information, he is subject to a fine of up to €32,000.
Other Taxes
Estonia’s national government does not assess any taxes on employment income other than those covered in the Income Taxes and Social Taxes sections of this primer.
State/Jurisdiction Taxes
Taxes on employment income are not assessed by any of Estonia’s linnad, vailad, or other jurisdictions.
COMPENSATION AND BENEFITS
Various labor laws exist in Estonia, including the Employment Service Act, the Holidays Act, the Collective Labor Dispute Resolution Act, the Wages Act, the Working and Rest Time Act, and the Republic of Estonia Employment Contracts Act. These laws cover minimum wage rates, overtime, hours of work, holidays, leave, wage payment, and termination pay. Workers’ compensation and retirement plans are covered under social taxes.
Coronavirus (Covid-19) Guidance: Employers may provide income tax-free reimbursements of the costs of home office equipment used to perform tasks related to an employee’s position. Employers may also agree in advance with employees what portion of home utility costs are related to work from home and reimburse those costs income tax-free.
Minimum Wage
Effective since Jan. 1, 2020, the minimum wage is €3.48 per hour or €584 per month.
Overtime
Overtime work, or work done beyond eight hours a day, is paid at a rate of 150% of regular remuneration. Work done at night, between the hours of 10 p.m. and 6 a.m., is remunerated at a rate of 125% or regular pay. Work done on a holiday is paid at 200% of the normal rate.
Hours of Work
A normal work day is eight hours and a normal work week is 40 hours. A work day cannot exceed 13 hours, including overtime work.
Holidays
Estonian law requires working time to be reduced by three hours the days before the following public holidays: New Year’s Day, Independence Day, Victory Day, and Christmas Eve.
The public holidays, paid by the employer, are as follows:
- Jan. 1: New Year’s Day
- Feb. 24: Independence Day
- Good Friday
- May 1: Spring Day
- June 8: Pentecost
- June 23: Victory Day
- June 24: St. John’s Day/Midsummer Day
- Aug. 20: Day of Restoration of Independence
- Dec. 24: Christmas Eve
- Dec. 25: Christmas Day
- Dec. 26: Boxing Day
Leave
Employers must give employees 28 calendar days of paid annual leave per calendar year.
Maternity Leave: Employers must provide pregnant employees 140 days of maternity leave. Employees can begin to take maternity leave 70 days before the expected birth date. Maternity leave is paid for by the health insurance fund.
Paternity Leave: Employers must give fathers 10 days of paternity leave within the two months before the expected birth date and within the two months after the birth of the child, paid by the health insurance fund.
Adoption Leave: Employers must give parents adopting a child 70 days of paid leave, which is paid for by the health insurance fund.
Parental Leave: Employers must give parents parental leave for up to three years after the birth of a child for raising children. Parental leave per year amounts to three days if a parent has one or two children under 14 years of age, six days if a parent has three children under 14 years of age, or one child under three year of age. Employers must give parents with disabled children one day per month or parental leave until the child is 18 years old. Employers can apply to be reimbursed for parental leave by the social insurance agency.
Study Leave: Employers must give employees study leave to participate in training sessions for up to 30 calendar days in any calendar year.
Vocational Training Leave: Employers must give employees 20 days to complete additional educational or vocational training, paid at the rate of minimum wage.
Exam Leave: Employers must give employees leave to take entrance exams. This leave in unpaid.
Wage Payment
Employers are required to calculate wage payments for employees on an hourly, daily, weekly, or monthly basis. Wages must be paid at least once a month. Collective bargaining agreements may be used for wage payment determinations and may be more favorable than what is required by law. Employers must provide employees with a payslip or pay advice at the time of payment if the employee requests one.
Bonuses and Special Benefits
Estonia does not mandate employers to provide bonus payments to employees.
Termination Pay
Employers must pay employees six months of average wages if an employment contract terminates unlawfully or if the nature of the offence is the fault of the employer.
To terminate an employment contract lawfully, an employer must give an employee notice within the following time frames:
- for less than one year of service, 15 days;
- for one to five years of service, 30 days;
- for five to 10 years of service, 60 days; and
- for more than 10 years of service, 90 days.
If an employer does not notify an employee of termination within the time frames provided, they must additionally compensate the employee for the appropriate number of days.
Workers’ Compensation
Workers’ compensation funds are covered under the sickness benefit, which is covered by social taxes.
Recordkeeping
Employers must keep employees’ written employment contracts for 10 years after the contract’s expiration.
FOREIGN WORKERS
Foreign workers are entitled to the same rights as Estonian citizens and are generally covered by the same tax and workplace laws. Citizens from the European Union and the European Economic Area do not need a visa to travel within Estonia.
Visas: Citizens from outside of the European Union and the European Economic Area can apply for a Schengen Visa, which will allow the individual to stay within Estonia for 90 days within a 180-day period. A long term visa can be applied for, which is valid for up to 12 months in Estonia.
Certain citizens as described by the Estonian Ministry of Foreign Affairs from Australia, Canada, and New Zealand are subject to different regulations for obtaining a long term visa.
Citizens wishing to stay in Estonia and work must obtain a short term residence permit and a work permit. Residence permits can be received through the Estonian Police Department. Long term residence permits can be applied for after five years of living in Estonia continuously with a short term residence permit.
Taxes: Foreign workers are subject to the same flat rate of income tax as Estonian nationals, which is 20% for all Estonian-sourced income paid to qualified nonresidents.
Wages/Payments: There is no provision specifically prohibiting employers from paying employees in a currency other than the euro.
WORKING IN THE UNITED STATES
Foreign workers from Estonia must meet general visa requirements and be certified to be employed in the U.S. General visa requirements for the U.S. are included in the separate
Estonia is eligible for the visa waiver program for business visitors, which allows Estonian citizens to travel to the U.S. for 90 days or less for business-specific purposes without having to obtain a B-1 business visa. Stays longer than 90 days will require a visa. Individuals may return to the U.S. under the visa waiver program if a “reasonable length of time” has passed. The determination for reasonable length of time is at the discretion of the Department of Homeland Security.
Estonian workers are eligible to work in the U.S. under H-2B visas, which cover labor or services of a temporary or seasonal nature in occupations other than agriculture or registered nursing. The number of H-2B visas issued each year is limited by U.S. law.
U.S. employers also must check the names of all new-hires and employees against the Specially Designated Nationals and Blocked Persons List, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). Because OFAC prohibits financial transactions with individuals on the list, employers cannot employ them and may face fines for failing to comply.
For tax purposes, Estonian citizens are subject to U.S. employment-based taxation on income earned in the U.S. unless they can claim an exemption under certain tax treaty provisions or they work under specific visa types that exempt earnings from taxes. Estonia has a tax treaty with the U.S.
State and local taxation of Estonian workers also can apply, although some states within the U.S. recognize international tax treaties that can eliminate that income tax liability for foreign workers.
The U.S. labor laws apply to all workers employed and providing services in the country.
Work eligibility as an employee is contingent upon Department of Homeland Security and Labor Department approval and the employee receiving a U.S. Social Security number from the Social Security Administration.
Tax Residency: In general, employees working in the U.S. on a temporary basis are considered nonresidents for tax purposes unless they qualify for resident status. Employees can be granted permanent resident status through the so-called green card test or if they meet the substantial presence test under the U.S. tax code. More information on these requirements is in the
Permanent residents are subject to U.S. tax requirements the same as U.S. citizens and are taxed under the U.S. system on their worldwide earnings.
Income Taxes: Generally, nonresidents in the U.S. who are from Estonia and are working in the U.S. are subject to U.S. taxes based on their U.S.-sourced income. Income is taxed differently based on whether it is categorized as wage income or nonwage income, which includes interest and dividends.
A Form W-4, Employee’s Withholding Certificate, must be filed by each employee with their employer. All nonresidents in the U.S. who are from Estonia and are working in the U.S. must claim “single” in Step 1c, regardless of marital status; write “Nonresident Alien” or “NRA” in the space under Step 4c of the form; and may not claim “exempt” in the space under Step 4c.
Nonresident alien employees may adjust withholding using Step 2b or 2c of the Form W-4; certain employees also may be able to use Steps 3, 4a, or 4b. More information about Form W-4 requirements for nonresident alien employees is available in the
Although the versions of Form W-4 issued in 2020 or later significantly differ from the versions issued in 2019 or earlier, nonresident employees that filed a valid version of Form W-4 from 2019 or earlier with their employer do not need to file another Form W-4 with the employer unless they need to implement a change for their withholding. On Forms W-4 issued in 2019 or earlier, nonresident alien employees were required to check the “single” box on line 3, regardless of marital status; write “Nonresident Alien” or “NRA” above the dotted line on line 6; and were not permitted to claim “exempt” on line 7 of the form.
An additional amount is added to a nonresident alien employee’s wages for calculating federal income tax withholding, with the amount based on pay period frequency and the date of the employee’s most recently filed Form W-4. The table of additional amounts applicable to Forms W-4 from 2020 or later and the table applicable to Forms W-4 issued before 2020 are available in the
Nonwage income and self-employed foreign workers can be subject to income tax withholding at a flat rate of 30%.
Additionally, foreign workers may be taxed differently based on the specific type of visa they hold.
Tax treaties: Estonia and the U.S. have a tax treaty with provisions addressing host country taxation of the nonresident workers. A summary of those benefits is listed in the Tax Treaty Exemption Comparison Chart. To claim the treaty benefit, the nonresident must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the employer.
Students and trainees in particular must include a statement with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. This statement affirms that the student or trainee is temporarily in the U.S. for purposes of studying or has accepted an invitation by the U.S. government (or by a political subdivision or local authority) for the purpose of studying or engaging in research for a period of 12 consecutive months by a university or other recognized educational institution in the U.S. It also must affirm that the individual will receive compensation for services performed in the U.S. The student/trainee exemption is not to exceed U.S. $8,000 a year.
Examples of the statements necessary to claim a treaty exemption from U.S. taxes are included in Internal Revenue Service Publication 519, U.S. Tax Guide for Aliens.
Social Taxes: Most foreign workers are subject to paying into the U.S. Social Security system. Foreign nationals who are exempt from paying income tax and who do not have the eligibility to receive a social security number may not be required to pay social taxes. Foreign workers contributing to Social Security for a certain time period may be eligible to receive benefits.
Generally, foreign workers in the U.S. that have specific visas as exchange visitors or students or who are temporarily in the U.S. for agricultural work are not subject to social taxes on income that is obtained from the purpose in which they originally entered the U.S.
Totalization Agreements: Estonia and the U.S. have not entered into a totalization agreement.
Wage Payment: Under certain visas for certain types of employment, employers are required to pay foreign workers the higher of either the prevailing wage or the actual wage that is paid to U.S. workers that have similar skills and qualifications.
There are no particular requirements that employees be paid in U.S. dollars.
TREATY ARRANGEMENTS
Estonia has entered into more than 50 income tax treaties, including an income tax treaty with the United States.
The countries with which Estonia has a bilateral income tax treaty in effect are Albania, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, the Czech Republic, Denmark, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Mexico, Moldova, the Netherlands, Norway, Poland, Portugal, Romania, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, the United Arab Emirates, the United Kingdom, the United States, Uzbekistan, and Vietnam.
Estonia also has income tax treaties in effect with Guernsey, the Isle of Man, and Jersey, which are crown dependencies of the United Kingdom.
Estonia has seven totalization agreements for social tax purposes. The countries with which Estonia has agreements are Australia, Belarus, Canada, Finland, Latvia, Lithuania, and Moldova.
RESOURCES
All Resources are in English unless otherwise noted.
General
Estonian Goverment
CIA World Factbook: Estonia
U.S. State Department: U.S. Relations With Estonia
Currency Details
Unicode Consortium: Currency Symbols
International Organization for Standardization: Currency Codes - ISO 4217
United Nations: United Nations Terminology Database: Estonia
Taxes
Tax and Customs Board (Estonian)
Ministry of Finance (Estonian)
Income Tax Act (Estonian)
Ministry of Social Affairs (Estonian)
Social Insurance Board (Estonian)
Finance Supervisory Authority (Estonian)
Health Insurance Fund (Estonian)
Unemployment Insurance Fund (Estonian)
State Pension Insurance Act
Funded Pensions Act
Health Insurance Act
Unemployment Insurance Act
Pension Centre, Pension Reform 2021
Compensation and Benefits
Labor Dispute Resolution Act
Employment Service Act (Estonian)
Holiday Act (Estonian)
Employment Contracts Act
Collective Labor Dispute Resolution Act
Foreign Workers
Police and Border Guard, Residence Permits
Ministry of Foreign Affairs
Working in the United States
U.S. Department of Labor:
- Foreign Labor Certification
- Hiring Foreign Workers
U.S. Internal Revenue Service:
- IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens
- IRS Publication 15, Circular E, Employer’s Tax Guide
- IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
- IRS Publication 519, U.S. Tax Guide for Aliens
- IRS Publication 901, U.S. Tax Treaties
U.S. Department of State, Visa Waiver Program
Treaty Arrangements