Payroll Taxes in Estonia – A Simple Overview

Payroll taxation in Estonia involves several different payments that must be accurately calculated and declared every month. Both the employer and the employee pay their respective shares, and the employer is responsible for withholding and remitting all taxes to the state. Employer costs on top of gross salary: social tax is 33% of gross salary, funding pension and health insurance schemes. The employer's unemployment insurance contribution is 0.8% of gross salary. These amounts are added on top of the employee's gross pay and form the employer's total labour cost. Deductions from the employee's salary include: income tax according to the applicable rate (taking into account the tax-free minimum), unemployment insurance contribution of 1.6% of gross salary, and for those enrolled in the mandatory funded pension scheme, a pension contribution of 2% (the third pillar is voluntary). All payroll-related taxes must be declared via the TSD declaration by the 10th of each month, with payment due on the same date. Late filing incurs interest charges. A proper payroll system and the support of a professional accountant help ensure that all calculations are correct and deadlines are met.