Working and Entrepreneurship Module Training Material Welcoming Programme
2019
Contracting company: Expat Relocation Estonia OÜ Contributors: Liia Hänni, Mari Pedak, Veiko Värk, Martin Lään, Andrus Ümarik and Andrus Alber
Design: Factory Advertising OÜ Layout : Flip OÜ, www.flip.ee Printing: Librixprint OÜ, www.omaraamat.ee Responsible publisher: Siseministeerium, Pikk 61, 15065 Tallinn Cover photo: “IPA”, Brand Estonia fotopank Welcoming programme website: www.settleinestonia.ee
Euroopa Liit Euroopa Sotsiaalfond
Eesti tuleviku heaks
The project is co-funded by the European Union via the European Social Fund and by the Ministry of the Interior of the Republic of Estonia © 2019, Ministry of the Interior of the Republic of Estonia. All rights reserved. Provided the use of the work is not carried out for commercial purposes, it is allowed to use it without the author’s permission as established in Chapter IV of the Copyright Act. The Ministry of the Interior points to the fact that pursuant to the Copyright Act, in the case of unlawful use of the work, compensation for the patrimonial or non-patrimonial damage caused and delivery of that which was received may among other things be claimed for.
Dear reader, This training material consists of introductory practical information intended for aliens interested in working and entrepreneurship in Estonia. The training material was prepared for the purpose of providing an overview of the rights of employers and employees, Estonian work culture, the taxation and pension system, networks of entrepreneurs and specialists, support services in the field of working and entrepreneurship, and lots of other useful information. The material was prepared on the Ministry of the Interior’s order, to implement the working and entrepreneurship module of the welcoming programme for new immigrants. The welcoming programme consists of various short and interactive training modules and its goal is to help foreigners arriving in Estonia to quickly and conveniently acquire the primary knowledge and skills essential for successful coping in Estonia. In addition to the working and entrepreneurship module, the welcoming programme also includes a basic module, a studying module, a research module, a family module, an international protection module, a children and young people module, and basic level (A1) language training. More information about the welcoming programme’s other modules is available on the website www.settleinestonia.ee The training material was prepared from the point of view of foreigners arriving in Estonia to work or to become entrepreneurs, and other foreigners interested to work or become entrepreneurs in Estonia. Every theme of the training material includes links to important additional materials or authorities, leading to websites with useful information in Estonian, English and/or Russian.
Welcome to Estonia!
Table of content
Part I: Estonian working and entrepreneurship environment........................ 7
Töötukassa’s career services.......................... 35
1.1 An overview of Estonian labour market................ 7
Career services of higher education institutions...............................................................36
1.2. Legal bases of working in Estonia..........................8 1.3. Estonian work culture.................................................11 1.4. Estonian taxation system......................................... 12 Most important taxes of natural persons....13 Most important taxes of companies.............15 Other taxes............................................................... 17 1.5. Health insurance.......................................................... 17 For the worker......................................................... 17 For the employer...................................................19 1.6. Pension system...........................................................20 I pillar: State pension...........................................20 II pillar: Mandatory funded pension..............20 III pillar: Supplementary funded pension....21
Rajaleidja centres..................................................36
3.5. In-service training opportunities.........................36 Work related training..........................................36 Informal training....................................................36 Training for the unemployed........................... 37
Part IV: Allowances and benefits............... 38 4.1. Unemployment insurance......................................38 4.2. Unemployment allowance.....................................39 4.3. Parental benefit..........................................................39
Part V: Entrepreneurship in Estonia............ 41 5.1. Economic and business environment.................41 5.2. Estonian export........................................................... 42
Part II: Working in estonia..............................22 2.1. Employment contract............................................... 22 2.2 Remuneration............................................................... 25 2.3. Settling labour disputes.......................................... 27
5.3. Setting up a company.............................................. 42 Legal form...............................................................43 E-residency.............................................................44 Activity licenses.....................................................45
2.4 Work time and rest time.......................................... 27
Most important legislation related to entrepreneurship..................................................46
2.5. Holiday............................................................................ 28
5.4. Company Registration Portal................................49
2.6. Employee representation and collective relations..........................................................................................30
Getting information about other companies...............................................................49
2.7 Other employment relationships..........................30
5.5. Organisations supporting entrepreneurship.. 49
2.7.1. Practical training.........................................30
5.5.1. Enterprise Estonia (EAS) .......................49
2.7.2. Trial day.........................................................30
5.5.2. County development centres (Maakondlikud Arenduskeskused)...............50
2.7.3. Voluntary work..........................................30
Part III: Support services in the field of work 32 3.1. Töötukassa – “Estonian Unemployment Insurance Fund”.................................................................. 32 Töötukassa’s services for registered unemployed people............................................ 32 3.2. EURES (European Employment Services).....34 3.3. Labour mediation portals / recruitment companies............................................................................. 35 3.4. Career services........................................................... 35
5.5.3. Business start-up subsidy by Töötukassa...............................................................51 5.6. Enterprise networks...................................................51 5.7. Start-ups......................................................................... 52 Links and useful resources.............................................54
Part I: Estonian working and entrepreneurship environment Part I of the material provides an overview of Estonian labour market, the legal bases of foreigners to work in Estonia, and Estonian work culture. It describes the taxation system and the most important taxes that employees and entrepreneurs have to know, as well as the possibilities of the
e-Taxation portal. In particular, Estonian health insurance (incl. the matters of compensation for treatment costs and sickness days) and pension system are described. The material also includes information about services available to foreigners (incl. upon job seeking).
1.1 An overview of Estonian labour market According to an Estonian labour force survey (www.stat.ee), there were about 664,700 working people in Estonia in 2018. 35% of them had a higher education, 39% had a vocational education, 10% had a general secondary education, 6% had a secondary specialised education and 10% had a basic or lower education.
As of 2018, 21% of all in employees Estonia were working in the industrial sector (this includes the processing industry, the mining industry as well as the water supply and energy industry). Other large areas of work are wholesale and retail trade (13%), construction and education (both 9%).
Figure 1. Number of employees (thousand) 670
642,5
615
587,5
560
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Figure 2. Education level of employees 10%
1 41% Tertiary education Secondary, post-secondary or pre-tertiry education Tertiary education
49%
7
Figure 3. Number of employees by areas of activity (thousand)
Agriculture, fishing, forestry Mining industry Industry Electricity and natural gas supply Water supply; waste handling Construction Wholesale and retail trade Transportation and warehousing Accommodation and catering Information and communication Finances, insurance Realestate Technology and research activities Administrative and helper activities Public administration and national defence Education Healthcare Arts, recreation and free time Other activities 0
According to Statistics Estonia, the unemployment rate in Estonia in 1st quarter of 2019 was 4,7%. The unemployment rate was the highest among
10
20 30 40 50 60 70 80 90 100 110 120 130
young people with basic education and the lowest among people with higher education.
1.2. Legal bases of working in Estonia
Detailed advice in Estonian, English and Russian about all immigration formalities is available from the PPA immigration advisory service. Working hours Mo-Fri 09:00-15:00 Tel: +372 612 3500 Email: migrationadvice@politsei.ee
Immigration formalities are a complex topic. It is strongly recommended that you consult directly with the Estonian Police and Borderguard Board before submitting your application. A foreigner has the right to work in Estonia with a right of residence or a residence permit; also, registered short-term work is allowed. No separate work permits are issued in Estonia.
A European Union citizen does not have to apply for a separate work permit to work in Estonia. A European Union citizen acquires a temporary right of residence upon registering his or her place of residence in Estonia. A European Union citizen may live and work in Estonia for up to 3 months without registering a temporary right of residence. A foreigner being a family member of a European Union citizen may work in Estonia only if he or she has
Temporary residence permit for work With a residence permit Temporary residence permit for entrepreneurship Working in Estonia
With right of residence
Short-term work (up to 12 months per year)
8
been granted a temporary/permanent right of residence as a family member of an EU citizen.
Information about how an employer can register a foreigner’s short-term work in Estonia can be found here:
Foreigners living in Estonia on the basis of a residence permit (non EU citizens) normally have the right to work in Estonia. A foreigner may also work in Estonia without applying for a separate permit if he or she has been issued a temporary residence permit for studies, on the condition that his or her studies do not hinder his or her studies, i.e. the person completes at least 75% of the curriculum.
https://www2.politsei.ee/en/teenused/ working-in-estonia/registration-ofshort-term-employment/
A foreigner staying in Estonia with a visa or without a visa requirement may work in Estonia if:
• his or her short-term working is
registered in the Police and Border Guard Board;
• he or she performs management or supervision functions as a management body member of a legal entity registered in Estonia.
In certain fields, a foreigner may work in Estonia without a residence permit for working while having a visa or a residence permit issued by a competent authority of a state party to the Schengen Convention and having the right to work in that state party, if:
• he or she starts working in Estonia due to the company relocating to Estonia;
• he or she has a legal basis for staying in Estonia;
• his or her period of working in
Estonia does not exceed 90 days within 12 consecutive months.
A foreigner must not work in Estonia if:
• he or she has been granted
a temporary right of residence on the basis of sufficient legal income; • he or she stays in Estonia without a legal basis, including if being obligated by an administrative act or a court decision to leave Estonia.
Short-term employment A foreigner can come to Estonia and work here without a residence permit if his/her short-term work I registered by the employer. This can be done for up to 12 months during any 15 month period.
The process of registering a foreigner’s short-term employment at PPA takes 10 working days. A quicker process (one working day) applies for some special categories of companies and workers (e.g. certified startup companies or if the employer is a large and well-established company and the future worker’s salary is at least twice the Estonian average, etc). After the short-term employment has been registered, the foreigner can start working in Estonia. Please remember that the foreigner may still need a visa to travel to Estonia. The fact that the short term working has been registered does not give the right to travel to Estonia. At the same time, the registration is a valid grounds for applying for a long term visa (D-visa) Registration by normal procedure takes up to 10 days. Residence permit for working In case you already have a job proposal by an Estonian company, you can apply for a residence permit for work. The application must be submitted personally. This can be done either in an Estonian embassy or in Estonia at the Police and Borderguard Board’s service centre. List of Estonian embassies (you must contact the embassy and make an appointment before going there): https://vm.ee/en/ embassies-and-representations
Detailed info about legal requirements for foreigners working in Estonia is on the PPA website:
If you wish to submit the application directly at the PPA service centre in Estonia, you can make an appointment here: https://broneering.politsei.ee/ You can find detailed information about the application process (incl all relevant forms) on the PPA website: http://www2.politsei.ee/en/ teenused/residence-permit/ tahtajaline-elamisluba/tootamiseks/ Usually, a foreigner needs to earn at least the Estonian average salary in order to receive a residence permit for work. In March 2019, this was 1,396 € gross. In some exceptional cases, this salary requirement is not followed (e.g. people who work in of-
NB! The fact alone that you employer has registered your short term employment in Estonia is not sufficient to travel to Estonia and work here. You must also have a valid visa or be from a country where visa free travel to Shcngen area is permitted.
9
ficially recognised start-ups, teachers and lecturers in Estonian schools and universities, actors and musicians in Estonian national theatres, etc. See a full list on the PPA web-site.) Usually a residence permit for work is given to foreigners to work for one concrete employer. A foreigner may simultaneously work for several employers, but must always continue to work for that employer which is mentioned on the decision regarding the residence permit. This employer’s registration code is also printed on the foreigner’s residence permit card.
ENIC/NARIC (Academic Recognition Information Centre) http://adm.archimedes.ee/ enic/en/
In what cases can a foreigner work in Estonia?
Read more about registering employment and about legal bases for working in Estonia on the Police and Border Guard Board’s website: https://broneering.politsei.ee/
Extending a Temporary Residence Permit for Work – language requirement In case a foreigner has lived in Estonia for 5 years with a Temporary Residence Permit for Work and wishes to extend that permit, the foreigner needs to pass an Estonian language proficiency exam of level A2 The European Union (EU) Blue Card is a residence permit work working, issued to a foreigner to live and work in Estonia in an official or employment position requiring high qualification. The higher professional qualification required when applying for an EU Blue Card is qualification with at least three years of required nominal duration of curriculum and certified by a document proving higher education, or professional work experience of at least five years. Work requiring higher qualification is work requiring knowledge and skills proven by a higher professional qualification. Before applying for an EU Blue Card:
• the compliance of a foreigner’s
Read more about how to create your start-up company to Estonia: http://startupestonia.ee/
•
qualification to requirements is assessed. The assessment of documents proving a higher professional qualification required to start working in a regulated position is co-ordinated by the Ministry of Education and Research pursuant to the Recognition of Foreign Professional Qualifications Act. Documents required to start working in an unregulated official or employment position are assessed by the Estonian ENIC/NARIC Centre as a structural unit of the Archimedes Foundation (Academic Recognition Information Centre). Documents proving work experience are assessed by the Police and Border Guard Board;
• the employer must sign an em-
ployment contract with the term of at least one year with the foreigner
10
or must make a job offer to the foreigner with which the employer expresses the will to be legally bound to the contract being signed and undertakes to employ the foreigner for at least one year in a position that requires higher qualification and is set out in the signed contract or the job offer made. Additionally, the employer must meet the salary criterion throughout the term of validity of the EU Blue Card. The conditions for starting to work for a new employer are set out on the PPA’s website. A foreigner may be unemployed for one period of up to 3 months during the term of validity of the EU Blue Card. Residence permit for entrepreneurship Residence permit for entrepreneurship can be applied for if the person has holding in a company or is self-employed and has:
• invested at least 65,000 euros of capital in the company’s activity in Estonia;
• as a self-employed person, has invested at least 16,000 euros in entrepreneurship in Estonia.
An investment can be considered a company’s equity capital, subordinated loan and registered fixed assets, among the rest. After one year or when extending the permit, it is allowed to replace the investment requirement with one of the folllowing criteria:
• Company’s sales revenue of at least 200,000 € per year
• Company’s payroll, which must be
at least 5 times the Estonian average monthly salary (e.g. company’s total expenses on salaries (incl social tax) equal at least 5 people’s Estonia’s average salary).
Start-up entrepreneurs Special rules exist for foreigners, wishing to apply for a Temporary Residence Permit for Business in case the business is officially recognised as a “start-up”. A start-up company is defined as a company aiming at developing and launching a business model that is with such a great global growth potential, innovative and reproducible that it shall make a substantial contribution to Estonia’s business environment. In order to qualify as a start up, a business plan needs to be reviewed and
approved by an expert committee. Applications to this committee can be made online here:
•
Specifics of working in Estonia in case of a foreigner having received a residence permit for entrepreneurship in Estonia:
• the person may work in a company set out in the residence permit, performing a management or supervisory function there without receiving remuneration for that;
• the person may perform a man-
agement or supervisory function in some other legal entity under the private law if at least one legal entity under the private law where the person performs a management or supervisory function pays the person a remuneration equal to at least the Estonian average monthly salary (coefficient 1.24).
The application must be submitted personally. This can be done either in an Estonian embassy or in Estonia at the Police and Borderguard Board’s service centre. List of Estonian embassies (you must contact the embassy and make an appointment before going there): http://vm.ee/en/estonianrepresentations-which-arehandling-visa-applications If you wish to submit the application directly at the PPA service centre in Estonia, you can make an appointment here: https://broneering.politsei. ee/An application for a new residence permit or an extension of an existing residence permit must be filed in a
service outlet at least 2 months before the end of the previous residence permit’s validity term. If less than 2 years have passed from the previous application and giving of fingerprints then you can apply for a residence permit by mail. Immigration quota Temporary Residence Permits for Work and Business are subject to an annual immigration quota. Size of the quota is 0.1% of Estonia’s population. In 2018 the quota size was 1,315 people.
In what cases is it forbidden for a foreigner to work in Estonia?
What are the key characteristics of Estonian work culture?
The quota does not apply for the following cases
• Top specialists (i.e. people who’s monthly salary exceeds double the Estonian average. In 2018 the top specialist’s monthly salary minimum was 2,442 € gross)
• Scientists and lecturers • IT specialists • Citizens of the European Union, USA and Japan
• People who currently hold a
Temporary Residence Permit for Study
• People who wish to work in offi-
cially recognised start-up companies or apply for a business permit to launch an officially recognised start-up
• People who apply for a business permit as a Major Investor
More information about the immigration quota can be obtained from the migration advisors of the Police and Borderguard Board
1.3. Estonian work culture In order to be successful in the Estonian work environment it is useful to understand the local work culture and the reasons why people behave in the work-related situations the way they do. It is also useful to compare different work cultures. Estonian working culture is generally task-oriented. Estonians are highly-organized planners who complete action chains by doing one thing at a time, preferably in accordance with a linear agenda. Estonian people prefer direct discussion, sticking to facts and figures from reliable, written sources. For Estonians speech is for information exchange and they talk and listen in equal pro-
portions. Estonians are truthful rather than diplomatic and do not fear confrontation, sticking to logic rather than emotions. They partly conceal feelings and value a certain amount of privacy. They are results-oriented and like to move quickly forward, compromising when necessary to achieve a deal. Estonians are law-abiding and have faith in rules and regulations to guide their conduct. They honour contracts and do not unduly delay payment for goods or services received. When doing business they are keen on punctual performance, good quality and reliable delivery dates. They are process-oriented, brief on the tele-
11
phone and respond quickly to written communication. Status is gained through achievement. Power distance in Estonia is usually small – interaction from subordinates to bosses to suggest changes or ideas is encouraged and common.
What should you keep in mind about Estonian working culture?
Taking responsibility for your actions is important in Estonian society. You make your own decisions, so you are responsible for the consequences. You are expected to be independent and show initiative. Time is very important to Estonians. Estonians are quite punctual and disapprove of being late. If you have agreed to attend a job interview, made an appointment with a doctor or need to attend a meeting with people you do not know very well, make sure you arrive on time or even early. If you cannot avoid being late and you know you will be late, make sure
you call in advance and let the other person or people know as soon as possible. In Estonian working culture it is important to keep in mind that:
• Men and women are treated equally;
• You (and your employer!) adhere to the provisions of the employment contract;
• You are expected to arrive at work and meetings on time. You may be considered unreliable if you arrive late;
• You are expected to stick to agree-
ments and deadlines. In case delays and problems arise, you should always inform others;
• You are not discriminated against and you do not discriminate against anyone else;
• You respect your colleagues and treat them the way you want them to treat you.
1.4. Estonian taxation system If you work in Estonia or do business here, you must heed the obligation to declare and pay the taxes established in Estonia. Estonians generally have a good tax discipline and a high sense of duty concerning the payment of taxes.
What are the state taxes established in Estonia?
Estonian taxation system is simpler than in most other countries. Several convenient e-solutions have been created to file tax reports and to communicate with the Tax and Customs Board. For example, 95% of tax declarations for the year 2014 were filed electronically. Estonian taxation system consists of state taxes and local taxes. State taxes are:
• income tax, • social tax, • unemployment contributions,
What are the possible local taxes in Estonia?
• • • • • •
insurance
land tax, heavy vehicles tax, value added tax, customs duties, gambling tax, excise duties.
The tax administrator for state taxes is the Tax and Customs Board. State taxes are paid directly to the state treas12
ury. Part of the natural person income tax and all of the land tax are paid into the relevant local governments’ budgets. The Local Taxes Act sets out the list of possible local taxes that a rural municipality council or a city council may establish with a tax regulation in its territory, and also sets out the procedure for establishing local taxes and the requirements for such taxes. Local taxes are a rare occasion in Estonia. These are advertising tax, road and street closure tax, motor vehicle tax, animal tax, entertainment tax and parking charge. These taxes can be established by local governments and the tax amounts are paid into the respective local governments’ budgets. Our tax burden is quite modest, compared with most European countries. Although Estonian tax burden increased in 2009 due to the global economic crisis, it has dropped again during the subsequent years. According to eurostat 2017, the tax burden in Estonia is approximately 33% of the GDP, which places us the 23th among all member states of the European Union. Tax burden is the highest in France (48.4%) and the lowest in Ireland (23.5%) (2017).
Figure 9. Taxes as a share in gdp Finland EU average Estonia Latvia Lithuania
50% 45% 40% 35% 30% 25% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Eurostat
Taxes on consumption make up 13.6% of Estonian GDP, placing us the 7th in the EU. Taxes on labour (most of the income tax, and all of the social tax and the unemployment insurance contributions) amount to 51% of Estonia’s tax revenue, which is equal to the EU average. Taxes on labour make up 16.6% of the GDP, placing us 15th in the European Union. Estonia has the European Union’s lowest tax rate on business income and capital. The share of taxes on capital in Estonia’s entire tax revenue is approximately 7%, while the EU average is about 21%. Taxes on capital make up 2.3% of the GDP, placing us the last i.e. the 28th. The position preceding us is held by Latvia with 3.5%.
come tax on their worldwide income. Taxable income includes income from employment, business income, interest, royalties, rental income, capital gains, pensions and scholarships (except scholarships financed from the state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.
What are the most important natural person taxes in Estonia?
Non-residents (i.e. people who live in Estonia for less than 183 days per calendar year) pay tax only on their income received from Estonian sources. Income taxable in Estonia includes:
• income from work under a labour
contract or contractor’s agreement in Estonia;
Figure 10. Tax burden by economic functions, (%) 60%
Labour force, Estonia Labour force, EU average Consumption, Estonia Consumption, EU average Capital, EU average Capital, Estonia
50% 40% 30% 20% 10% 0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Most important taxes of natural persons Income tax People who have lived in Estonia for more than 183 days within a period of 12 months, are considered tax residents of Estonia. Residents pay in-
• income from a business carried on in Estonia;
• interest income received from Estonia (only if it is substantially higher than that on similar debt claims);
• royalties;
13
• income from the lease of assets located in Estonia; gains from disposal of assets located in Estonia;
• directors’ fees paid by Estonian enterprises;
• income of a sportsman or an artist from his or her activities in Estonia
• pensions and scholarships. The income tax rate is 20%. Beginning from 1 January 2019 the overall tax-free amount (basic exemption) of up to 6000 euros per year or up to 500 euros per month will be applied on all types of income and the increased basic exemption on pension and compensation for accident at work will not be applied in the future. In year 2019:
• annual income up to 14 400 euros
gives 6000 euros as annual basic exemption
• in case annual income increases
Social tax In addition to the income tax, your employer has to pay social tax amounting to 33% (20% for pension insurance and 13% for health insurance) of your gross salary. Bear in mind, this is the tax for the employer that is based on your actual salary; it’s not subtracted from your salary. The social tax payable by the employer gives you another important benefit – health insurance coverage in Estonia. Social tax paid for you is also used to calculate your maternity benefit, sickness benefit or parental benefit. Unemployment insurance benefit calculation is based on your unemployment insurance contributions.
from 14 400 euros to 25 200 euros, basic exemption decreases
You should never accept undeclared cash payments, if such are offered
according to the following formula: 6000 – 6000 ÷ 10 800 × (income amount – 14 400)
by an employer. It is illegal in Estonia to pay or receive untaxed salaries. Besides being a legal offence, receiving your salary undeclared will not give you any social security benefits.
• if annual income is above 25 200 euros, basic exemption is 0.
Examples With the annual income of 17 100 euros, basic exemption 4500 euros is calculated as follows: 17 100 – 14 400 = 2700 6000 ÷ 10 800 = 0,55556 0,55556 × 2700 = 1500 6000 – 1500 = 4500 euros Other examples: Annual income 19 800 euros gives 3000 euros as basic exemption Annual income 22 500 euros gives 1500 euros as basic exemption. Read more here: www.emta.ee/eng
14
In Estonia, taxes are automatically withheld from your gross salary by your employer each month, which means you don’t have to make additional payments or file monthly tax returns related to your salary.
Unemployment Insurance Premium In addition, people working in Estonia pay an unemployment insurance premium that is paid by both the employer and the employee – 1.6% of the employee´s gross salary is withheld and 0.8% is paid by the employer. Example of all taxes related to a person who’s gross salary is 1,000 € Declaring your taxes If you have only received income from regular employment in Estonia and aren’t expecting any deductions, you won’t have to file a return at all.
In case you are eligible for any tax deductions you will need to file a yearly tax return. Most of these return forms are pre-filled by the tax service and often you only need to confirm with your digital signature that all the details are correct. That’s again something Estonia is famous for – filing a yearly tax return usually takes a couple of minutes. If you need to file a yearly tax return, that is usually done at the beginning of each year to report your previous year’s income. The deadline for the yearly tax return is March 31. The Estonian Tax and Customs Board has detailed information on who has to file a return, and how it is done. https://www.emta.ee/eng/ private-client The most important items you can deduct from your taxable income are (limitations exist in each of the cases – please check the exact details from the Tax Authority’s website):
• Interest
payments on the mortgage of your permanent residence
• Education expenses of you and your children (only officially listed educational institutions are eligible) • Donations to certain charities • Deductions based on number of
children (starting from the 2nd child)
The above deductions from taxable income can be made in a sum of up to 1,200 € per year.
Most important taxes of companies Using the e-taxation system as a company To start using the e-Taxation portal as a company, you will need to register your company as a user of the e-Taxation portal. The relevant information can be found on the website of the Tax and customs Board: www.emta.ee All the taxes in Estonia can be declared via E-tax/e-customs, which is an electronic service desk of the Estonian Tax and Customs Board. E-tax/e-customs works 24 hours a day and 7 days a week. Via the e-tax/e-customs it is possible to:
How are tax declarations filed in Estonia?
You can find more info about taxes in Estonia on the web page of Estonian Tax and Customs Board: www.emta.ee
• Submit declarations and notices • Perform customs operations
• Be aware of one’s tax operations • Securely communicate with the Tax and Customs Board
Important deadlines for taxpayers For companies
• * 10th day of every month - dead-
line for submission of the TSD declaration: declaration of income and social tax, unemployment insur-
15
What is the specific feature of company income tax in Estonia?
ance premiums and contributions to mandatory funded pension
• * 20th day of every month - dead-
registered as a value added tax payer in the Tax and Customs Board. If the turnover is less, the registration is not
For private persons
As a value added tax payer, you will have to:
• * 31st of March every year - dead-
• add the value added tax to the sales
line for the submission of the Vlaue Added Tax declaration
line for submitting a personal income tax declaration for the previous year
Company income tax The specific feature of company income tax in Estonia is that only distributed profit is taxed. Profit reinvested into the company is tax-exempt. A company must pay income tax on:
• distributed profit, • expenses and payouts unrelated to business, and gifts,
• donations, • hosting expenses, • fringe benefits to employees. Additionally, decrease of a company’s capital, buyback of company shares or units, and payout of liquidation shares in the extent exceeding the monetary and non-monetary contributions made into the company’s equity capital are taxable by income tax.
When must a company be registered as a value added tax payer? What does this entail? Detailed information on Value Added Tax (VAT)
The company income tax rate is 20/80. The taxation period is one month. The Income Tax and Social Tax Declaration (TSD) contains data about the company’s payouts to natural persons in the previous calendar month. The TSD declaration must be filed with the Tax and Customs Board by the 10th day of the following month. This can be done electronically via the Tax and Customs Board’s e-taxation portal (see links in the previous chapter). Value added tax Value added tax is accounted on goods and services sold in the course of business, import of goods from countries outside the European Union and purchases of goods from countries within the European Union. Value added tax is a tax on added value and it is paid by the end consumer. Value added tax must be added to its products and services by an entrepreneur registered as a value added tax payer. If a company’s taxable annual turnover exceeds 40,000 euros counting from the calendar year’s beginning then the company must be
16
obligatory.
price when selling goods or providing services;
• keep value added tax accounts; • calculate and pay the value added tax amounts;
• preserve the documents related to
the transactions and issue invoices compliant with requirements.
The general value added tax rate is 20% of the taxable value of an item or a service. Some goods and services are subject to the tax rate of 9%, for example books, study workbooks, periodicals, medicines listed by the Ministry of Social Affairs, sanitary and hygiene products, and medical devices intended for personal use by disabled people. The value added tax rate is set to 0% for several goods, including exported goods, consultation services provided to a taxpayer of another EU member state, but also watercraft and aircraft used in international traffic. Services subject to 0% value added tax are e.g. those provided outside Estonia, several services related to water and air transport, and freight carriage services. The turnover of several social-oriented goods and services is tax-exempt, for example postage, insurance, healthcare and social services. You can reduce the taxable turnover by the value added tax paid on the acquisition of goods or services used for the taxable turnover (input value added tax). The taxation period of value added tax is one calendar month. The value added tax declaration must be filed and the tax must be paid to the Tax and Customs Board by the 20th day of the month following the taxation period. To register your company as a value added tax payer, you must file an application (in Estonian) with the Tax and Customs Board together with the required documents. Social tax Social tax is tax used for pension in-
surance and state health insurance. Social tax is paid for the employee by his or her employer. An entrepreneur must pay social tax on both salaries and fringe benefits. In some exceptional cases, the Estonian state pays the social tax – for example for a parent of a child under 3 years of age and for persons receiving various caretaker benefits and families with many children. Also, the state pays the social tax for employees who have certified 40% loss of work capacity if the employer files the relevant application. The social tax rate is 33% (20% for social security and 13% for health insurance) of the employee’s gross salary (for example, if an employee’s gross salary is 1,000 euros, you will pay 330 euros of social tax for the employee). The taxation period is one calendar month and the entrepreneur must declare the social tax and pay it to the Tax and Customs Board by the 10th day of the following month. The declaration can be filed electronically through the e-Taxation portal or by contacting a regional tax centre of the Tax and Customs Board. In 2019, the minimum monthly salary taxable by social tax is 500 euros, i.e. the minimum social tax obligation for an employer is 165 euros per month.
Other taxes Land tax is levied on the taxable value of all land (other than that which is specifically exempt) based on an official valuation. The owners of the land are liable to land tax. The annual land tax rate varies between 0.1% and 2.5% of the assessed value of the land. The council of the local authority is authorised to establish the rate of land tax.
You can find more info about taxes in Estonia on the web page of Estonian Tax and Customs Board: www.emta.ee
Excise duties are levied on tobacco, alcoholic beverages, fuel, electricity and packages. Heavy goods vehicle tax is paid for the following classes of vehicles which are intended for the carriage of goods: lorries with a maximum authorised weight or gross laden weight of not less than 12 tons; road trains composed of trucks and trailers with a maximum authorised weight or gross laden weight of not less than 12 tons. Gambling tax is imposed on amounts received from operating games of skill, totalizator, betting and lotteries. Tax is charged also on gambling tables and machines used for games of chance located on licensed premises.
1.5. Health insurance Health insurance in Estonia is governed by the Health Insurance Act. Health insurance is obligatory in Estonia, funded by social tax. Health insurance functions according to the solidarity principle: the treatment service does not depend on the amount of social tax paid for the specific person. Most of the healthcare services enabled by the health insurance are fully paid for by the Health Insurance Fund, but there are services and medicines that the patient partially needs to pay for.
For the worker NB! Everyone in Estonia is entitled to emergency medical care, regardless of whether they have health insurance or not! An insured person is a permanent resident of the Republic of Estonia or a person living in Estonia by virtue of a temporary residence permit or by the right of permanent residence or a person legally staying and working in Estonia, who pays the social tax for
himself/herself or for whom the payer of social tax is required to pay social tax. Insured persons are:
• A person working on the basis of an employment contract;
• A public servant; • A member of the management or
You can get more information about the Health Insurance Act on the website of Riigi Teataja at www.riigiteataja.ee
supervisory board of a legal entity;
• A person employed on the ba-
sis of a contract under the law of obligations;
• A person registered at Töötukassa (Estonian Insurance Fund);
Unemployment
Who has health insurance in Estonia?
• A person, who participated in the elimination of the consequences of a nuclear disaster;
• A conscript; • The non-working spouse of a diplomat or a public servant;
• The curator of a disabled person; • A person receiving child care allowance;
17
• A dependant spouse, for whom the government pays social tax;
• A person receiving social allowance.
•
According to the Health Insurance Act some persons for whom no social tax is paid are considered as having equal status to the insured person. The persons having equal status are:
• A pregnant woman; • A person under 19 years of age; • A person receiving state pension granted in Estonia;
• An insured person’s dependent spouse, who is no more than 5 years away from attaining the age limit for old-age pension;
• Pupils (there are age limits); • A student, who is permanent resident;
• A person joining with the scheme voluntarily.
Not compensated 1
2
3
Examples of health insurance services offered by insurance providers: ERGO
4
…
The Health Insurance Fund compensates 70% of the previous calendar year’sincome taxable by social tax
8
You can check whether you are insured or not by logging into the state e-portal www.eesti.ee and accessing “My Data” (ENG). The insured person does not need to take the Health Insurance Fund card for attending the doctor in Estonia, it is sufficient to have an identification document with photo. In addition to the state health insurance, private health insurance services are also available in Estonia. Voluntary health insurance is intended for those who have no state health insurance from the Health Insurance Fund. Voluntary health insurance covers medical treatment costs. It is also
•
Compensation for sickness days You are obligated to immediately inform your family physician if you fall ill. After examining you, the family physician issues an electronic certificate for sick leave and after the certificate’s term ends, he or she immediately forwards the certificate to the health insurance database via the X-Road interface. You will receive temporary incapacity for work benefit based on the certificate for sick leave. An employee must inform his or her employer immediately when the sick leave is ended. The employer makes its own entries to the electronic certificate of temporary incapacity for work within 7 calendar days after becoming aware of the termination of the certificate of
Employer compensates 70% of the employee’s average pay
The insurance premium is calculated on the basis of Estonia’s average monthly gross salary, published by Statistics Estonia, multiplied by 0.13. The amount of the insurance premium is adjusted annually, once Statistics Estonia has published Estonia’s average gross salary per calendar month. The premium in 2016: 1 month 138,50 euro, 1 quarter year 415,50 euro, 1 year 1,662 euro).
18
possible to buy dental health insurance from insurance providers.
9
…
Not compensated
182
183
temporary incapacity for work. The payment and rates of the incapacity for work benefit are described by the following figure: Read more here: http://www.haigekassa.ee/en/ people/benefits/benefits-temporaryincapacity-work The first three days of a sick leave are not compensated for the employee. For days No. 4–8 of the sick leave, the employer pays the benefit for the employee. Starting from the 9th day, the Health Insurance Fund pays the benefit. The Health Insurance Fund pays the benefit starting from the second day of the sick leave if the reason for the sick leave is:
• • • •
a occupational illness, an occupational accident, an occupational traffic accident, complications/illness due to occupational accident,
• injury while protecting the interests of the state or the society, and while preventing a crime,
• illness during pregnancy. In case of transferring a pregnant woman to an easier job, the Health Insurance Fund pays the employee a benefit starting from the first day of working in the job corresponding to her health status. A parent has the right to stay at home from work if caring for a sick child. In that case, the parent being absent from work is paid 80% of the previous calendar year’s income taxable by social tax if the child is under 12 years of age and is cared for in a hospital or at home. The benefit is paid from the 1st day to the 14th day. If the child’s sickness is caused by a malignant tumour and the child’s treatment starts in a hospital then the eligible period of care benefit if caring for a child under 12 years of age is up to 60 calendar days. In case of other family members, the eligible period of care benefit if caring for them at home is up to 7 days. If caring for a child under 3 years of age or a disabled child under 16 years of age, a person insured under a care certificate is eligible for care benefit for up to 10 days if the person caring for the child is themselves ill or is receiving obstetrical care. For how many days per year can one take sick leave? Certificates for sick leave have a limitation of the period of paying the benefit. If a person has been ill for more than 120 calendar days (178 calendar days in case of tuberculosis), the physician treating him or her must send a medical expert committee an application for an extension of the benefit payment period or for a decision of permanent incapacity for work, doing so by the 121st day (178th day in case of tuberculosis). If necessary, ask your physician whether that application has been filed. On the 4th-8th sickness days, the benefit amount is 70% of the employee’s average salary. Starting from the 9th sickness day, the benefit amount is 70% of the previous calendar year’s taxable remuneration. If you did not work in the previous year, the benefit is calculated on the basis of the minimum remuneration rate (the minimum salary was 500 € in 2018 and it is 540 € in 2019).
In case of the relevant decision of the expert committee, the insured person is eligible for sickness benefit for up to 182 consecutive calendar days (240 calendar days in case of tuberculosis) per one occasion of sickness. Medical treatment abroad To be referred to medical treatment abroad, a separate application must be filed with the Health Insurance Fund, preferably enclosing the decision of a committee of physicians if possible and an extract of the medical history. To obtain the decision of a committee of physicians, turn to the treating physician who will then summon one. Applications without such a decision are processed longer because then the Health Insurance Fund needs to contact the person’s treating physician on its own, asking to summon the committee. The Health Insurance Fund covers the treatment costs of only those who have received the relevant permit. If the person files a compensation application or a treatment invoice later, without a previous agreement, the Health Insurance Fund will not compensate the treatment costs. Travelling For travelling on the territory of the European Union, one should have a valid European Health Insurance card or the substitution certificate, which can be applied for from the Health Insurance Fund. Everyone who has Estonian health insurance from Estonia, has the right to get the European Health Insurance card (incl citizens of third countries)
Read more about health insurance in Estonia on the Estonian Health Insurance Fund’s website: www.haigekassa.ee
For the employer Formalising an employee’s health insurance If a person starts working normally and under an employment contract and social tax will be paid for him or her in Estonia then the employer will have to register the employee in the Register of Employees. For that, the person should have an Estonian personal ID code and he or she must not have health insurance in some other EU country. If a foreign citizen working in Estonia has no Estonian ID code and also cannot apply for one before starting work then the employer can register the employee for up to five days using the date of birth stated in his or her per19
sonal identity document. Registration by date of birth does not grant the employee with social guarantees, including health insurance.
On what conditions is state old-age pension paid?
After the person receives an ID code, the validity term of the person’s registration of work can be extended. No new record needs to be initiated and instead the record with the date of birth is amended to state the personal ID code. After entering the employee’s ID code into the employment
register, the employee becomes entitled to health insurance pursuant to the Health Insurance Act. The necessary data are automatically and electronically sent to the Health Insurance Fund. Data about the person’s end of employment must be sent to the employment register (PHP) within 10 days from the date of the employment’s end.
1.6. Pension system How is the I pillar of the pension system funded?
The aim of the Estonian pension system is to help people maintain their standard of living and monthly income when they retire. The Estonian pension system comprises of three pillars: I pillar: State pension II pillar: Mandatory funded pension
How big is Estonian average pension in 2017?
III pillar: Supplementary funded pension
I pillar: State pension
How is the II pillar of the pension system funded?
How is the mandatory funded pension paid out?
What is supplementary funded pension?
The state pension is a pension paid by the state, the aim of which is to ensure a minimum regular monthly income for the persons who have reached the retirement age, have become incapable for work or have lost their provider. There are several different types of state pensions: old-age pension, pension for incapacity for work and the survivor’s pension, pension Under favourable conditions, national pension and superannuated pension. The state old-age pension is paid to a person who has reached the age of retirement and whose length of employment is at least 15 years. The general age of retirement in Estonia is 63 years, the pensionable age for women is gradually increased to 63 by the year 2016. By the year 2026, the general age of retirement in Estonia will be 65 for both men and women. The state pension is based on the principle of solidarity, which means that the pensions to the today’s pensioners are paid from the taxes of people who are currently working. The state pension is paid by the state from the funds collected to the state budget from the social tax. The direct
1
20
Statistics Estonia
payer of the social tax is the employer who withholds 33% social tax from the salary of the employee, which the state then pays for health insurance and pensions. In Estonia, pension is paid only for the time of working in Estonia. Pension for the time of working in other courtiers is paid by the respective country. To receive pension from another country, contact that country’s competent authorities. Estonia spends about 1.6 billion euros per year on old-age pensions for its ca 304,236 pensioneers. The average old-age pension in 2019, 1st quarter, was 448,2 €1
II pillar: Mandatory funded pension The aim of the second pillar is to direct a part of the salary of the people who are working towards their personal pension, so that people would have, in addition to the state pension an additional pension that they accrue themselves. In case of the mandatory funded pension, an employee pays monthly 2% of their gross salary to the pension fund they have selected and the state adds 4% out of the current social tax that is paid by the employee. The money paid into the pension funds is managed by the fund management companies who invest the pension contributions paid by the employees into different assets with the aim of increase the value of the money contributed by the employees over the years.
Subscribing to the funded pension is mandatory for persons who were born in 1983 and later. To receive payments, an application must be submitted to an insurance company in order to conclude an insurance contract or to a bank in order to receive payments from the pension fund. Before submitting an application, the total value of the shares must be established. It can be done through the My Account section of www.pensionikeskus.ee, but also by contacting a bank or insurance company. Opening an account for the II pillar The pension account is a personal account of the person who has subscribed to the mandatory funded pension, which holds information regarding his or her second pillar: applications submitted, funds chosen, contributions made, units of pension funds acquired, data of the units and payments. There are two options for opening a pension account:
• The pension account is opened
on the basis of the choice application immediately after the choice application is received by the Estonian Central Securities Depository. The choice applications are received by the Depository through banks, internet bank or My Account of the Pension Centre. www.pensionikeskus.ee/en/
• The pension account is opened on
the basis of the data received from the Tax Board if the obligated person, who was born after 1 January 1983 has become 18 years old and has started working, but by the time of his or her first salary payment, has failed to submit the choice application to subscribe to the funded pension. This is called subscribing by drawing of lots.
•
III pillar: Supplementary funded pension The third pillar or the supplementary funded pension was established with the aim of providing people with an opportunity for those who wish to increase their pension via optional supplementary contributions. There are two options for subscribing to the supplementary funded pension:
• conclude a pension insurance con-
tract with a life insurance company or
• make contributions to the voluntary pension fund.
There are also two options for receiving payments:
• payments on the basis of the insurance contract or
• payments from the voluntary pension fund.
The sums of the contributions made to the supplementary funded pension can be determined by the person and the amount of the contributions can be changed at any time. If the contributions to the supplementary funded pension are less than € 6,000 or 15% of the gross income per year, no income tax is charged on the contributions. National pension National pension is one of the types of state pension. National pension is paid to those pension-age people who do not have enough work experience (15 years) for old-age pension. A person is eligible for national pension if he or she is a permanent resident of Estonia or a foreigner with a temporary residence permit or right of residence, living in Estonia and:
•
••
• being at least 63 years old; • having lived permanently in Estonia at least 5 years prior to filing the application for pension.
The rate of national pension in 2019 is 205,21 euros. Read more about national pension here:
••
If you want to get more info about State pension (I pillar, incl Old-Age Pension and National Pension), please contact the Social Insurance Board of the Republic of Estonia: Phone: 16 106 (from abroad: +372 612 1360) from Monday to Friday 9:00–17:00 E-mail: info@sotsiaalkindlustusamet.ee Web: www.sotsiaalkindlustusamet.ee Address: Endla 8, 15092 Tallinn, Estonia If you want to get more info about Funded pension (II and III pillar), go to: Phone: +372 640 8886 from Monday to Thursday 9:00–17:00 E-mail: info@pensionikeskus.ee Web: www.pensionikeskus.ee/en/
21
Part II: Working in estonia The second part of the material discusses mattes related to employment contracts (signing and termination) and remuneration, work time and rest time, and solving labour disputes. The rights and obligations related to holidays are also explained. Additionally, the material discusses the field of concealed employment relations and the employees’ opportunities to belong to unions and the possibilities opening up through that. Work has a very important role in Estonian culture and the worldview
of Estonian people. As the country is small, the work-related structures in Estonia are less hierarchical and more flexible. Hard-working nature is highly valued in Estonian society, so it may be easier to move up on a career ladder and to achieve self-actualisation in Estonia. Work-related matters can be agreed in three main types of contracts – an employment contract, a contract for services and an authorisation agreement.
2.1. Employment contract When starting to work, it is very important to sign a written contract setting out the rights and obligations of both the employee and the employer, as well as other significant matters concerning the work. The existence of a contract provides you with certainty that agreements are kept and also serves as a clear basis for solving any disputes. An employment contract may be signed for a fixed term or an indefinite term. A fixed-term employment contract may be signed only for a justified reason and for the time of performing work that has a temporary nature, for example in case of a temporary increase of work volumes, to perform seasonal works or to substitute for an absent employee. Therefore, it must be known at the time of signing a fixed-term employment contract that the agreed work will end. In the employment contract, the employer must clarify the reasons for signing a fixed-term employment contract so that the employee understands it. A fixed-term employment contract may be signed for up to five years or for the duration of substituting for an absent employee. No more than two fixedterm employment contracts may be signed for work of a similar nature, and a fixed-term employment con22
tract may be extended only once in the five-year period. If a third consecutive contract is signed for work of a similar nature or a contract is extended for the second time then it is considered that the employment contract has an indefinite validity term since its signing. Contracts are consecutive if the time between one contract’s end and the other’s beginning does not exceed two months. If the employee does not continue working after the term’s end then the employment contract expires upon the term’s end. But if the employee continues working after the term’s end and the employer does not express a wish to the contrary within five days of becoming aware of it then the employment contract is considered to have an indefinite term. Employment contracts in Estonia are governed by the Employment Contracts Act. The natural person (employee) works for the other person (employer) under the employment contract in subordination to the management and supervision of the employer. The employer undertakes to remunerate the employee for such work. Pursuant to the legislation, the employer and the employee conclude a written employment contract (see exceptions below).
The written document of an employment contract must include at least the following data:
• Details of both parties (name, per-
sonal identification code or registration code, residence or domicile);
• Date of conclusion of the employ-
ment contract and employee’s starting date;
• In the case of a fixed-term employ-
ment contract, the duration of the contract and the basis for entry into the fixed-term contract;
• Official title if it is supplemented with legal effects;
• Job description; • Place or region where the work is to be performed;
• Other benefits where applicable; • Working hours during which the
employee is to perform the duties agreed upon;
• Length of the employee’s leave; • Reference to the term(s) for advance notice concerning termination of employment contract;
• Rules of working order established by the employer;
• Reference to the collective agreement, if a collective agreement applies to the employee;
• Wage conditions (the remunera-
tion agreed upon (wage), additional remuneration, the basis for calculating the remuneration, the procedure for payment and when wages are payable (pay day), the charges and taxes to be paid and withheld by the employer).
NB! Taxes will be withheld from the salary indicated in the contract – that is why the sum that will be transferred to your bank account will be smaller than the one written in the contract! An employment contract is entered into in duplicate original copies, one of which is retained by the employee and one by the employer. An oral employment contract may be entered into only for employment lasting less than two weeks. An employment contract may be amended only by the agreement of the parties. Amendments to the terms of an employment contract are formalised in writing in the employment contract. If a dispute should arise between the employer and the employee, both parties have the right
to turn to a labour dispute committee or court. Work conditions may be agreed not only in the employment contract but also in a collective agreement. Collective agreements are not widespread in Estonia but it is still worth finding out whether there is one when starting to work. Probationary period The goal of a probationary period is to provide the employer and the employee an opportunity to assess the compliance of the employee’s health status, knowledge, skills, abilities and personal characteristics with the level required for the work. During the probationary period, the employer assesses the employee’s suitability for the agreed work and the employee can find out his or her abilities and willingness to work in that position. The maximum duration of a probationary period is 4 months. With an employment contract, the parties may agree in writing that the probationary period is not applied or is shortened. During or immediately after the probationary period, the employment contract may be terminated. Read more about the termination of an employment contract during the probationary period in the next chapter. Various bases for termination of employment contracts By agreement of the parties The employee and the employer may terminate the employment contract at any time if they so agree. To terminate an employment contract by agreement, one party must make a relevant proposal to the other party and the other party must express his or her unambiguous consent. To avoid later disputes, the termination of the employment contract by agreement should be formalised in writing. Upon expiry of the term Only a fixed-term employment contact can be terminated by expiry of its term. Pursuant to the law, the parties do not have to inform each other of the arrival of the term’s expiry but common sense dictates that it is preferable that the employer remind the employee about the nearing of the term’s expiry. If the employee continues working after the contract’s term expires then the contract is considered to have an indefinite term, except if the employer expresses a wish to the contrary with23
in five days after the employer became aware or should have become aware that the employee continues to fulfil the employment contract. To avoid later disputes, the termination of an employment contract by expiry of its term should also be formalised in writing.
for the cancellation of an employment contract during the probationary period.
By cancellation An employment contract must be cancelled with a cancellation statement issued in a format reproducible in writing. Any cancellation ignoring that form requirement is void.
Only an employee can cancel an employment contract by way of planned cancellation, informing the employer 30 calendar days in advance. If the employee informs about the employment contract’s cancellation for less than 30 calendar days in advance, the employer has the right to demand that the employee pay compensation for the number of days that the advance notification period was shorter, based on § 100 (5) of the Employment Contracts Act.
Format reproducible in writing enables sending the cancellation statement by e.g. E-mail or fax. This format does not require signing by hand. It is also allowed to present the cancellation statement in written format i.e. on paper with signature by hand or by e-mail with digital signature. In case of disputes, the party having presented the cancellation statement must be able to prove its presentation. The cancellation of an employment contract must not be conditional i.e. the cancellation of an employment contract must not be connected to a circumstance, the arrival of which is not certain. The statement must indicate the basis for the cancellation; in case of extraordinary cancellation, the reason must be stated; and the end date of the employment contract must be stated in any case. It is recommended to reason in the statement of extraordinary cancellation why the legally required advance notification times were not followed. During the probationary period The employee and the employer may cancel a fixed-term or an indefinite-term employment contract during the probationary period, informing the other party 15 calendar days in advance. If the employer or the employee informs about the cancellation for a shorter period in advance, the employee or the employer is entitled to compensation in the amount of the employee’s average workday’s remuneration for each workday that the advance notification period was shorter. The employer must not cancel the employment contract for a reason contrary to the probationary period’s goal. Therefore, the cancellation’s reasoning must be connected to the probationary period’s goal and it must be stated in a format reproducible in writing. The employee does not have to provide the employer with reasons
24
Planned cancellation An employer cannot cancel an employment contract by way of planned cancellation.
The compensation is the employee’s average workday’s remuneration for every workday included in the period by which the advance notification was shorter. An employee may cancel an indefinite-term employment contract, but also a fixed-term employment contract signed for the purpose of substituting for an absent employee. No fixed-term employment contract signed for any other reasons can be cancelled by way of planned cancellation. In case of planned cancellation, the employee does not have to provide the employer with reasons for the cancellation. Extraordinary cancellation Extraordinary cancellation of an employment contract is permitted only with good reasons and respecting the advance notification periods set out in the law. Both parties may cancel an employment contract in extraordinary manner for a good reason. Extraordinary cancellation of an employment contract must be reasoned by the party presenting the cancellation statement and the reasoning must be stated in a format reproducible in writing or in written format. The employer may extraordinarily cancel an employment contract for reasons stemming from the employee or for economic reasons. Reasons stemming from the employee may be that the employee:
• is unable to continue working due to his or her state of health;
• cannot cope with work duties due to insufficient knowledge or skills;
• has ignored the employer’s orders;
• has been at work in a state of intoxication;
• has stolen, defrauded, damaged the employer’s property;
• has caused mistrust; • has violated the obligation to keep secrets and confidentiality.
An employer may cancel an employment contract for economic reasons if it becomes impossible to continue the employment relation under the agreed conditions due to reduced
work volumes or work reorganisation or other cases of work ending. The employer must inform the employee about extraordinary cancellation for the following number of days; if the employee’s employment relation with that employer has lasted for:
• less than 1 work year – at least 15 calendar days;
• 1–5 work years – at least 30 calendar days;
• 5–10 work years – at least 60 calendar days;
• 10 and more work years – at least 90 calendar days.
2.2 Remuneration Remuneration is an obligatory condition to be set out in an employment contract – i.e. the employee and the employer must agree about the remuneration paid for the work. The employment contract (a written document) must state:
• the remuneration agreed upon signing the employment contract, incl. the pay depending on economic results and transactions (as gross amount);
latter’s request. If a remuneration agreement cannot be proven then a labour dispute committee or a court considers the remuneration to be equal to the usual remuneration paid for similar work. The employee must prove the remuneration paid to other employees performing similar work in the same company or elsewhere.
• the manner of payment (bank
If the employer does not pay taxes on the employee’s remuneration and the employee does it instead, the employee has the right to demand that the employer compensate him or her the incurred damage (e.g. the amounts of taxes and contributions paid).
• the pay day (at least once per month); • the taxes and contributions withheld
If a pay day is a national holiday or a rest day then the pay day is considered to be the workday preceding it.
• the manner of calculating the remuneration item-based);
(time-based
or
transfers or cash payments);
from the remuneration (income tax, social tax, etc. – may be stated as a reference to legislation).
It can be agreed additionally in the employment contract or the collective agreement, what share of the remuneration is made up by the base salary, additional pays, bonuses, added pays, benefits, etc. If the parties agree that overtime is compensated in money then 1.5 times the remuneration must be paid to the employee for every hour of overtime. For night time work, the employer must pay 1.25 times the remuneration. It can be agreed in the employment contract that remuneration also includes the pay for night time work. All benefits (additional pays) are clearly stated parts of the remuneration. The employer is obligated to keep clear and detailed accounts of the remuneration and to present these accounts to the employee upon the
The employer employee:
must
pay
the
• average
remuneration while the employee is in work-related training;
• average remuneration while the employer does not provide him or her with work;
• remuneration for the time that the employee performs a trustee’s duties;
• average remuneration while the
employee is unable to work due to personal reasons (being at a physician, in a state authority, at a funeral, etc.).
Special cases remuneration
of
paying
• If compensating overtime with
money, the employer pays the employee 1.5 times the remuneration.
• For night time work (from 22:00 to 6:00), the employer pays the
25
employee 1.25 times the remuneration. The parties may agree that the remuneration includes the pay for night time work. If the employee receives a minimum salary then it cannot include the pay for night time work.
• If the work time is on a national hol-
iday, the employer pays 2 times the remuneration for the work.
• Overtime work, night time work
and work performed on national holidays may be compensated as rest time if agreed with the employee.
Pay on economic results If the employment contract states that the employee has the right to receive a part of the employer’s profit or turnover then the employee’s part is calculated on the basis of the employer’s approved annual report. The employee’s part must be paid out within 6 months from the approval of the annual report. Pay on transactions If it is agreed that the employee has the right to receive agent’s commissions on mediation or preparation of contracts, the employer must pay that in compliance with the Law of Obligations Act. Pays on economic results and transactions are parts of remuneration and are taken into account when calculating the average remuneration and in other cases related to remuneration. Compensating training expenses The employee and the employer may agree in writing that the employer makes additional expenses for the employee’s training (in addition to the obligatory costs) and the employee works for the employer for a certain time in order to compensate those expenses (a bound period – not more than 3 years). The employee must compensate the employer’s incurred additional costs proportionally to the time left until the end of the bound period if:
• the employee cancels the employ-
ment contract before the bound period passes (except if the reason for cancelling the employment contract is the employer’s violation of the employment contract);
• the employer cancels the employ-
ment contract before the bound period passes and the reason for the cancelling is the employee’s violation of the employment contract.
26
An agreement with a minor to compensate training expenses is void. Reducing the remuneration The employer has the right to subject the employees to the national minimum salary for up to 3 months in a year if unforeseen temporary economic hardship independent from the employer occurs. The rights and obligations of the parties in that case:
• the employer must inform the em-
ployees about the remuneration reduction 14 days in advance and initiate consultations to discuss the subsequent work arrangement;
• before reducing the remuneration,
the employer must offer another job if possible;
• the employee has the right to re-
fuse to perform work duties proportionally to the reduction of remuneration;
• the employee has the right to cancel
the employment contract with a 5 day advance notice and to receive redundancy compensation (1 month’s average remuneration from the employer, the rest from Töötukassa).
Compensating the employee’s expenses The employer must compensate all reasonable expenses that the employee has incurred when performing work duties. It is forbidden to compensate these expends on account of the employee’s remuneration. Business trip expenses
• Daily allowance must be paid in case of business trips abroad;
• In case of business trips within the country, the employee has the right to demand the compensation of expenses (e.g. transport, communication, accommodation, etc.);
• the employee has the right to demand prepayment and to refuse to go to the business trip if no prepayment is made.
Returning the remuneration The employer may demand the return of unjustified remuneration or prepayment paid to the employee, doing so within 12 months from the receipt of the remuneration or prepayment. Prepayment can be withheld from the remuneration without the employee’s consent. To withhold the remuneration, the employee’s written consent is required and the consent cannot be given before incurring the right to offset.
2.3. Settling labour disputes In Estonia, labour disputes are settled by the Labour Inspectorate. It is quicker and simpler to solve a labour dispute between an employee and an employer in a labour dispute committee of the Labour Inspectorate than in a court. The procedure is free if charge and the committee usually makes a decision within 30 days. A labour dispute case is reviewed by the head of the labour dispute committee as the state’s representative, plus a representative of employees and of employers. The three-member committee hears out both parties of the dispute and makes a decision, which is compulsory for the parties. If the parties do not agree with the labour dispute committee’s decision, they can turn to a court. The sessions of labour dispute committees take place in all county centres of Estonia. Labour Inspectorate can also provide legal counselling in labour matters. The lawyer hotline 640 6000 is open for questions every workday at 9:00–16:30. The hotline is answered by the Labour Inspectorate’s lawyers, advising about employment contracts and collective agreements, work time and rest time, holidays, remuneration and work environment safety. You can also ask a lawyer over e-mail: jurist@ ti.ee.
E-mails are also answered in English if necessary. The Work Life Portal www.tooelu.ee (in Estonian and Russian) is a thematic joint portal of the Labour Inspectorate,
the Ministry of Social Affairs, the Health Board and the National Institute for Health Development, gathering information from authorities regulating work life concerning employment relations, work environment, occupational health and safety, and related topics. Among the rest, the portal offers work environment manuals for various fields of activity, the contact data of providers of occupational health and safety services, and information about the use of holidays, the payment of remuneration, health promotion, and other topics. The Labour Inspectorate also performs state supervision over compliance with the requirements set out in the legislation. All this has the goal of contributing to the improvement of the quality of work life.
What are the advantages of a labour dispute committee over courts?
For example, a labour inspector is obligated to:
• investigate fatal occupational acci-
dents and if necessary then cases of occupational illnesses and other occupational accidents;
Read more about the services of Labour Inspectorate on the Inspectorate’s website: www.ti.ee
• perform supervision over the in-
vestigation of occupational accidents and over the implementation of measures to prevent occupational accidents and illnesses;
• inspect the compliance of work
conditions in a new or reconstructed building with the prescribed requirements;
• stop the performance of works hazardous to the life of the worker or other people and prohibit the use of tools hazardous to life.
2.4 Work time and rest time Duration of work time Full work time is 40 hours per week or 8 hours per day. The employer and the employee may agree to use part time work i.e. shorter than full work time. For example, the employee will work for 20 hours a week. Rest time
• Daily rest time • The employee must rest for at
least 11 consecutive hours per 24 hour period. Thus, a work shift together with overtime must not exceed 13 hours.
• Weekly rest time • The employee must rest for at
least 48 consecutive hours per week. In case of summarised work time accounting, the employee must rest for at least 36 consecutive hours per week.
• Rest breaks during workday • The employee must get rest breaks during workday. After working for 6 hours, the employee has the right to rest for at least 30 minutes.
• Rest breaks during workday are not accounted into work time. Rest breaks during workday can be accounted into work time if
27
rest breaks cannot be provided due to the nature of the work. In that case, the employee must be able to rest and dine during the work time.
• Shortened work time before national holidays
• The workdays preceding the
ry of the Republic of Estonia, the Victory Day and the Christmas Eve are shortened by three hours.
• The employer must shorten the
workday immediately preceding the aforementioned national holidays.
New Year’s Eve, the anniversa-
2.5. Holiday Annual holiday An employee has the right to an annual holiday of 28 calendar days per calendar year. In the first work year, the employee has the right to an annual holiday if he or she has worked for the employer for at least six months. In that case, the holiday is granted for a number of days proportional to the time worked in the calendar year. Holiday schedule An employer prepares a holiday schedule for every calendar year, accounting for the employees’ reasonable wishes. How long is annual holiday and how is it granted?
The holiday schedule must be made available to the employees within the first quarter of the calendar year. The following persons have the right to holiday at the time convenient for them:
When does a holiday claim expire?
• women immediately before and af-
ter pregnancy and maternity leave or immediately after childcare leave;
• men immediately after childcare
leave or during their wife’s pregnancy and maternity leave;
• a parent raising a child of up to 7 years of age;
• a parent raising a child of 7-10 years
of age – during the child’s summer holidays;
• a minor subject to compulsory
school attendance – during the summer holidays.
• Annual holiday expires in one year after the end of the holiday year.
Holiday pay An employee must be paid holiday pay in full no later than on the penultimate workday before the start of the holiday. The parties may agree a different time of paying the holiday pay but it must not be later than the first pay day after the holiday.
28
An employee having worked for at least six months during the first work year has the right to a holiday for a number of days proportional to the number of months worked. It means that half a year after starting to work, the employee may take a holiday for half the prescribed holiday duration. Minor-aged employees, women before or after their pregnancy and maternity leave and employees having partially lost their work capacity after work-related health damage are entitled to full holiday regardless of the time worked. Upon end of an employment contract, the employer is obligated to compensate any unused unexpired annual holiday vacation to the employee in money. The time of the annual holiday is set by the employer, accounting for the employee’s wishes if those are compatible with the employer’s interests. The employer prepares a holiday schedule. An annual holiday lasts for at least 28 calendar days. A calendar day means all days from Monday to Sunday. The annual holiday of minors and persons receiving incapacity for work pension is at least 35 calendar days. The annual holiday of employees in education and research is up to 56 calendar days. An employer has the right to refuse to divide annual holidays into shorter than 7 day periods. Holidays are granted for a worked calendar year, within the year, and the time being the basis for granting holidays does not include the time spent on childcare leave or holiday without pay. Holiday without pay If necessary, an employee may apply for a holiday without pay. To do so, an application must be filed with the employer, stating clearly the wish to use holiday without pay and the time of using it. Holiday without pay is nor-
mally granted only with an agreement between the employer and the employee. An employer is obligated to grant an employee holiday without pay for taking final exams of upper secondary schools and entrance exams of vocational education institutions, professional higher education institutions or universities, if the employee so requests. Study leave Working people can take a study leave for adult formal education and in-service training under the Adult Education Act for 30 calendar days per calendar year, if the provider of the education or training has an activity license or has filed a notice of economic activity. During a study leave granted for work-related self-development, the average remuneration is paid for 20 days. Study leave is also granted for participation in adult formal education and in-service training in an equivalent educational institution of a foreign country. During the study leave, the employee is paid a study leave pay for 20 calendar days, based on the employee’s average calendar day’s remuneration. An additional study leave of 15 calendar days is granted for the completion of adult formal education, and the study leave pay calculated on the basis of the minimum remuneration is paid for this. An employer may refuse to grant a study leave for the completion of adult formal education if the employer has already granted a study leave to the same employee for the completion of the same curriculum. Other additional forms of holiday Additionally, the following holidays and leaves are available in Estonia: Pregnancy and maternity leave A woman has the right to a pregnancy and maternity leave of 140 calendar days, which she may take starting from the 70th calendar day before the estimated date of birth. If a woman starts using a pregnancy and maternity leave less than 30 calendar days before the estimated date of birth, the leave is shortened by that duration. During a pregnancy and maternity leave, the Health Insurance Fund pays maternity benefit for the mother. The amount of maternity benefit is 100% of the employee’s average remuneration for one calendar day, calculated on the basis of the calendar year preced-
ing the taking of the pregnancy and maternity leave. The benefit is paid out as a lump sum. Paternity leave A father has the right to receive a total of 10 working days of paternity leave during the two months before the estimated date of birth determined by a doctor or midwife and during the two months after the birth of the child. The purpose of the paternity leave is to provide fathers with more free time to spend with their child and family. The use of the paternity leave does not depend on whether or not the child’s mother is using a pregnancy and maternity leave. It is also not important for the use of the paternity leave whether the child’s father is married to the child’s mother or not. Adoptive parent leave An adoptive parent of a child under 10 years of age has the right to adoptive parent leave of 70 calendar days as of the date of entry into force of the court judgement approving the adoption, and the leave can be used by one parent at a time. The adoptive parent has the right to 100 percent of the average remuneration per calendar day, calculated on the basis of the calendar year preceding the court judgement approving the adoption. Child care leave A mother or father has the right to child care leave until his or her child reaches the age of three years. Child care leave may be used by one person at a time, and either as a single full period or in parts at any time. For example, the child care leave can be taken by one parent in the beginning, then by the other parent, then by neither of them and later by one of them again. It must be kept in mind when using the leave that in the period after the child’s birth until the child attains 70 days of age, only the mother is eligible for childcare benefit. Child leave Each calendar year a mother or father has the right to receive child leave for 3 working days if she or he has one or two children under 14 years of age, or for 6 working days if she or he has at least three children under 14 years of age or at least one child under 3 years of age. Child leave without pay A mother and father who is raising a child of up to 14 years of age or a disabled child of up to 18 years of age has the right to child leave without pay of 29
•
up to ten working days every calendar year. Child leave without pay can be taken by not only a parent but also the child’s guardian or a person with
whom a foster parenting agreement has been signed. Read more here:
•
2.6. Employee representation and collective relations
Estonian Trade Union Confederation
A trade union is an organisation founded only at the wish and initiative of employees to improve the working and living conditions in joint action of employees and in collaboration with the employee and to protect the employees’ rights and interests. Trade unions are independent from employers, state authorities and other organisations.
• ensuring the help of a lawyer in
Services provided by trade unions to their members:
• negotiating with employers for bet-
The joining of trade unions is voluntary in Estonia. If you wish to join a trade union, ask for more information from your employer’s human resources department or directly from the trade union.
• protecting employees from the
Major trade union organisations:
• protecting employees from dis-
• Estonian Employees’ Unions’
• Introducing employees to their legal rights;
Estonian Transport and Road Workers Trade Union
ter salaries and work conditions;
employer’s arbitrary power in employment relations; crimination at workplace;
Estonian Service and Retail industry Trade Union
• supporting employees in disputes
solving disputes;
• helping ensure the certainty of job
and increase the feeling of security in work life;
• creating a feeling of cohesion in the workplace;
• participating actively in arranging the work life of employees.
• Estonian Trade Union
Confederation - www.eakl.ee Confederation TALO www.talo.ee/
or labour disagreements with the employer;
2.7 Other employment relationships The following forms of employment relationships are allowed in Estonia, but only in very specific cases.
2.7.1. Practical training Pursuant to Estonian law, practical training (apprenticeship) in a company or an authority is possible in only two cases: first, if a school refers a student to practical training of the vocation or profession being learned, and second, if a person has become, is registered as unemployed and Töötukassa offers the labour market service of practical training. If there are people who wish to learn a new profession by practical training and not in a school or through Töötukassa then for example a twoway contract for practical training is signed with a company. The contract sets out the duties that the trainee will perform. Depending on the trainee’s work results and/or an agreement with the employer, the trainee may also be paid remuneration. 30
2.7.2. Trial day An employer cannot demand unpaid performance of work on trial days. The employer is exempt from paying remuneration for a trial day only if the person attended the trial day solely to observe the future workplace and did not perform any work tasks and any real work. Pursuant to the law, work trial is a service provided by Töötukassa and lasts for one day. Work trial lets the person try working in the offered position and lets the employer obtain certainty that the candidate is suitable for the position before signing the employment contract. The prerequisite for arranging work trial is that the employer is using the services of Töötukassa when looking for a person to fill the vacancy.
2.7.3. Voluntary work Voluntary work is work performed under free will and without expect-
ing to be paid for it. The website of TÜÜtukassa states that the purpose of voluntary work is to increase a person’s chances of obtaining a job, help prepare the person for work life, provide the person with new experience and knowledge, and help the person acquire or preserve working habits. Voluntary work can include various
activities for the benefit of the public and the society. Voluntary work is primarily seen as something done in the field of culture, education, social work, environment protection or other public interest.
31
Part III: Support services in the field of work Part III of the material discusses the support services to help foreigners in the field of working in Estonia – Töötukassa, EURES, career services, job portals. This part also introduces the opportunities to get in-service training and to participate in informal learning activities. You can get more information about these laws on the website of Riigi Teataja at www.riigiteataja.ee
What is entailed in registration with Töötukassa and why is it useful?
What services can registered unemployed people get through Töötukassa?
A great source of information regarding various work related support ser-
The Work in Estonia portal is a gateway for foreigners interested in working in the country. It contains a lot of useful information about coming to Estonia, working and living here. Read more at www.workinestonia.com.
3.1. Töötukassa – “Estonian Unemployment Insurance Fund” The responsibilities of Töötukassa are the implementation of active labour market policies, management and payment of unemployment and work ability benefits, provision of employment services to jobseekers and employers, and assessment of work ability. The legal basis of the activities of Töötukassa is found in two laws: the Unemployment Insurance Act which describes the unemployment insurance system and the organisation of Töötukassa, and the Labour Market Services and Benefits Act, which contains the provisions concerning job mediation and related services. In order for Töötukassa to help you, you must first contact yourself with Töötukassa. When you register yourself as unemployed, your individual situation will be assessed and a job mediation consultant will help you in your efforts to find new employment. Registration is a condition to receive unemployment related benefits. . If you are not unemployed (or do not meet the criteria to register as such), but are looking for (other) employment, you can register as jobseeker in order to gain access to job mediation services..
32
vices and job offers is available at the official Work In Estonia website.
Töötukassa’s services for registered unemployed people Töötukassa offers the following services to registered unemployed people:
• Job search assistance in a format
of job clubs or workshops aimed at preparing participants for job search and working life, providing an overview of the labor market situation and job opportunities.
• Career information and career
counselling provides information related to job-seeking and studying possibilities and helps to make informed decisions concerning career development.
• Job mediation is a service that
helps to find suitable positions for job-seekers and the unemployed. This service is free of charge. Information about working abroad is available from Töötukassa’s EURES consultants.
• Labour market training gives
a person the knowledge and skills needed to secure employment. Person`s existing skills and knowledge, the positions which are or will be available on the labour market, and the requirements of potential future positions are all taken into account when selecting
the most appropriate training. The training can last for up to one year.
• Support for obtaining qualifica-
tion compensates the costs and state fees of acquiring documents proving a qualification (incl. a professional or competence certificate and a driver’s license for motor vehicles).
• Work practice is a labour market service to acquire practical work experience, supplementing the knowledge and skills needed for a job.
• Coaching for working life is tem-
porary paid work which does not require professional or special training. Unemployed people can only be asked to do public work if they wish to do so.
• Work practice is a labour market service for the purpose of restoring work habits or shaping initial work habits, as well as increasing the unemployed person’s social inclusion.
• Wage subsidy aims to support the
hiring of people who are long-term unemployed, young, of decreased working ability, recipients of international protection or who have been released from prison. The salary is partially compensated for the employer with this measure.
• Business start-up subsidy is a fi-
• Adaptation of work premises and
equipment means making the employer’s building, rooms, workplace or work means accessible and usable for people with a disability or long-term heath disorder. An application for compensation of the costs of adjusting workrooms and equipment is submitted by the employer to Töötukassa.
• Provision of technical aids a per-
son who needs it for working due to his or her health disorder.
• Communication support at inter-
views is a service for the unemployed who because of their disability or health disorder need help in communicating with the employer at a job interview.
• Working with a support person is a service for those who
• need assistance and supervision in working. The support person helps the person to get used to the working environment or colleagues and practice work tasks.
• Individual job placement service
supports clients whose employment is difficult due to long-term unemployment, social and other special needs, disability or longterm health problems or other particular obstacles and who can not be employed by other services.
nancial aid granted for the registered unemployed who would like to start with their own business.
• Psychological, debt or addiction
• Business mentoring and coach-
• Occupational rehabilitation is de-
ing is intended for those who have received business start-up subsidyto support the implementation and sustainability of their business plan.
counselling is available for unemployed with such problems.
signed for people who have many obstacles due to their disability or illness and who therefore need help from different professionals or the rehabilitation team to go to work or continue working.
You can find all the contacts of Töötukassa at their web page www.tootukassa.ee.
33
•
• Peer support is for people who
need the support of an individual with a similar disability or illness. The objectives of peer support is to help the client in coping with their disability or illness, to boost their motivation and self-confidence
and to prepare them for job seeking and working life or the continuation of work. For more information related to labour market services offered by Töötukassa, please refer to:
•
3.2. EURES (European Employment Services) One of the principles of the European Union is the free movement of employees. Every citizen of the European Union has the right to live, work, seek a job and attain pension in any of the 28 countries in the European Union. The regulation of free movement of European Union employees also applies in the European Economic Area (Iceland, Liechtenstein and Norway) as well as in Switzerland. EURES (European Employment Services) is a co-operation network established in 1993 and supporting the principle of free movement of employees; it includes not only the EU member states but also the members of the European Economic Area and Switzerland. There are over 850 EURES advisers in 32 countries of the network, providing information about vacant jobs, living and working conditions and safe job seeking in all countries of the network.
You can find the advisers’ contacts on the Estonian website of EURES at www.eures.ee/contact. You can also send an e-mail to EURES Estonia: eures@tootukassa.ee.
In terms of supporting free movement of employed persons and their families it is important that the persons would not lose their social security when entering employment or looking for work in another country. In order to avoid loss of social security the employed persons and their families moving within the Community have been ensured:
• Equal treatment: the person hav-
ing moved from one country to another is entitled to equal treatment with the person who has permanently lived and worked in one country. It means that granting of benefits should not be affected by citizenship;
• Aggregation of insurance peri-
ods: when applying for benefits the completed periods of insurance, working or living in another country are taken into consideration;
• Preservation of rights: the bene-
fits a person is entitled to are also paid in case the person goes to live, work or look for work in another member country.
34
In Estonia, the EURES activities are co-ordinated by Töötukassa. There are 5 EURES advisers in Töötukassa’s service outlets, working daily to advise job seekers and employers. Basic information about the EURES services is also available in all departments of Töötukassa and via the hotline 15501. EURES advisers are working in Tallinn, Tartu, Pärnu and Narva. The Estonian website of EURES at www.eures.ee provides lots of useful information about working in Estonia, like:
• • • •
Labour Market information Looking for job in Estonia How to apply for a job Checklist for before and after you arrive in Estonia
• Registration and residence permits • Employment contract • Acknowledgement of diplomas and qualifications
• Starting a business • The social security system in Estonia
• • • • •
Incomes and taxation Right to unemployment benefits Living in Estonia Finding school Vehicle & driver´s licence
If you wish to start working in another European country, the first step could be signing up for a user account at the international job seeking portal of EURES and entering your CV into the portal. Also, you should familiarise yourself with the living and working conditions of the possible destination countries – you can find all the necessary information in the EURES Estonia portal, section “Living and working conditions in Europe” (“Elamis- ja töötamistingimused Euroopas”). If you have any questions, feel free to contact the EURES advisers of your area.
3.3. Labour mediation portals / recruitment companies Labour mediation portals The largest labour mediation portals in Estonia are:
• www.cv.ee/ • www.cvkeskus.ee/
•
Recruitment companies Private recruitment companies can help in finding necessary specialists. See link below for a list of companies offering recruitment services:
•
3.4. Career services Töötukassa’s career services Career counselling Töötukassa’s career counselling supports people in making informed decisions concerning their career development. The counselling encompasses questions and topics related to studies and to the choice of job and profession. Career counsellors are working in all regional offices of Töötukassa. Career counselling is intended for registered unemployed people and also for employees having received a redundancy notice, as well as other people wishing to obtain those services, including working adults. Career counselling can help you if:
• you have no training needed for employment;
• you have no earlier work expe-
rience and only little knowledge about the working world;
• you have not been working for a long time and your professional skills have become outdated;
• you are unable to work in your profession due to health reasons or other important reasons;
• you cannot find work in your profession because there is no demand for it in the labour market;
• you wish to assess your outlooks in
order to choose a profession and find a suitable training and job;
• you need advice for better results in job seeking.
Career counselling is available in Estonian, Russian and English and takes place individually or in groups. If you are registered as unemployed, turn to your personal consultant in order to book a time for a career counselling sessioon. In case you are not registered as unemployed, you can
book a time for a career counselling session either by turning to a regional office of Töötukassa or via the self service portal of Töötukassa (accessible via www.tootukassa.ee; personal ID-card is needed for logging in). Also, in case you are not registered as unemployed, it is possible to receive career counselling via Skype of through e-mail. Individualcounselling normally takes 45 minutes but the intended results may need more time. This is why you can attend several counselling sessions if necessary. Group counselling takes place among a group of more people (usually 8 – 16). Communication in a group enables you to learn from other’s experiences and share your own, develop your teamwork and self-expression skills, and find support in group mates. Career information rooms Career information rooms provide information in Estonian, English and Russian about job seeking as well as advice and support in making work-related choices. Career information rooms are opened in all regional offices of Töötukassa. You can see samples of job application documents there, as well as materials introducing various learning and working opportunities. You can use a computer with Internet access to create your own job application documents and to participate in job competitions. Career information specialists are working in career information rooms; they can help you with answering questions (e.g. guide you in preparing your job application documents and in finding job offers).). Anyone can come to a career information room.
When should you turn to a career counsellor?
How does career counselling take place?
What is a career information room?
Education-related support services You can find more information about education-related support services in the family or studying modules of the Welcoming Programme.
35
You can find more info and all the contacts of Töötukassa on their website: www.tootukassa.ee. Read more about the services of Rajaleidja centres (in Estonian and Russian) on their website: www.rajaleidja.ee
Rajaleidja centres Young people aged 7–26 years can get career information from Rajaleidja (Pathfinder) centres in all of Estonia. Parents can turn to any Rajaleidja centres to support their child’s future choices. The centres provide information about education opportunities, labour market situation and professions, as well as career counselling. The service is free for young people of up to 26 years of age and their parents.
tion institutions serve those entering the universities, as well as students and graduates. The main services are career counselling, guidance in job seeking, and mediation of jobs and practical training placements. Read more about the career services of major Estonian universities:
•
• University of Tartu: • Tallinn University (in Estonian and English):
••
• Tallinn University of Technology
••• Sciences (in Estonian): •••• • Estonian Academy of Music and Theatre (in Estonian): ••••• (in Estonian and English):
•
Career services of higher education institutions The career services of higher educa-
• Estonian University of Life
3.5. In-service training opportunities
••
••• •• •• •• •• •
•• •• ••
Work related training With work related training, you can improve your work related knowledge and skills various fields, in order to increase your professional qualification and be more competitive in the labour market. Work related training for adults is provided by many private training institutions, vocational education institutions, higher education institutions and professional associations. Work related training is usually paid for by the trainees themselves or their employers, but there are also free training courses. If you pay for your training yourself, the Income Tax Act provides you with the right to an income tax refund in the extent of the amount paid for the training, if the training organisation has a license for in-service training or has filed the relevant economic activity notice with the Estonian Education Information System. Working people can take a study leave of up to 30 calendar days per calendar year for the training courses, if the training organisation has a license for in-service training or has filed an economic activity notice. During a study leave for in-service training, the average salary is paid for 20 days. An employer is obligated to allow an employee to participate in training courses. An employee must not be fired because he or she wishes to take in-service courses. Estonian higher education institutions also offer in-service training. Some examples:
36
• Tallinn University of Technology: www.ttu.ee/taiendusoppijale/ (EST)
• University of Tartu:
https://www.ut.ee/en/LLL
• Narva College of the University of Tartu http://www.narva.ut.ee/ru/ kursy-povysheniya-kvalifikacii-2 (RUS)
Informal training In informal training, one can learn exactly what one finds interesting, thus developing oneself and acquiring the knowledge and skills needed to cope in life. Informal training is provided by informal training centres, folk universities, cultural centres and many other centres. See a list of organisations offering informal training here:
••••••
The major organisations offering informal training are for example:
• Tallinn Folk University: www.kultuur.ee/ (EST)
• Tartu Folk High School: https://rahvaylikool.ee/ tartu-folk-high-school/
For the courses, one can take a study leave of up to 30 calendar days per calendar year, pursuant to the Adult Education Act. If the study leave is granted for work-related self-development then the average salary is paid for 20 days during the study leave.
But mostly, the trainees have to pay for the informal courses. Pursuant to the Income Tax Act, a trainee is eligible for income tax exemption in the extent of the amount paid for the courses, if the training organisation has a license or has filed the relevant economic activity notice with the Estonian Education Information System.
Training for the unemployed Labour market training is provided to the unemployed by Töötukassa. The participation in training courses is agreed in the individual job seeking plan.
Read more about the training courses offered by Töötukassa:
See more on the website of the Ministry of Education and Research:
http://www.tootukassa.ee/eng/ content/services/training You will assess and analyse the training need together with your consultant. If you have already registered with Töötukassa, your job mediation consultant is your preferred contact person. Töötukassa help line 15501 (calling from abroad, use +372 614 8500). Skype: tootukassa
The list of informal education schools is available on the website of Estonian Nonformal Adult Education Association (in Estonian) at www.vabaharidus.ee
email: info@tootukassa.ee Address: Lasnamäe 2, Tallinn 11412.
You can get more information about the Adult Education Act on the website of Riigi Teataja at www.riigiteataja.ee
In what cases can one participate in labour market trainings?
37
Part IV: Allowances and benefits You can get more information about the Unemployment Insurance Act on the website of Riigi Teataja at www. riigiteataja.ee
What conditions must be met in order to get unemployment insurance?
Part IV of the material introduces the work related benefits paid in Estonia –
4.1. Unemployment insurance Unemployment insurance in Estonia is governed by the Unemployment Insurance Act. The goal of unemployment insurance is to provide the employee a substitute source of income during the period he or she is unemployed, support an active job search and offer the employer economic support in the case of collective collective redundancies. Who is eligible? You become eligible for unemployment insurance benefits if:
• You have been registered as unemployed;
• You have filed an application for unemployment insurance benefits;
• You have been employed and paid
unemployment insurance premiums for at least 12 months within the 36 months preceding registration as unemployed;
• Your employment relationship was terminated on grounds giving you the right to seek indemnity.
• Your previous employment must
How to apply for unemployment insurance?
How big is unemployment insurance?
38
unemployment insurance, unemployment allowance and parental benefit.
have ended through no fault of your own to become eligible for unemployment insurance benefits. This means that you can only receive a benefit when your employer has terminated your contract, or when the contract has run out. No benefit is granted when you have left your job by choice, on your own initiative, or following a mutual agreement with your employer, or when you have been dismissed due to an infringement, loss of confidence, or indecent act or act of corruption. The one exception to this rule is when you have resigned on your own initiative because the employer breached the contract by violating the terms and conditions
of the contract or changed the organisation of production or work. Some employers prefer to end employment agreements by mutual consent, because this is the easiest and most conflict-free way to do so. Be sure to understand the consequences concerning your right to benefits before you enter in such an agreement. How to apply? To apply for the unemployment insurance benefits, you must fill in the application for registration as unemployed and the application for the unemployment insurance benefit, which is available from offices of Töötukassa or online from the website of Töötukassa. Töötukassa shall make the decision with regard to payment of the benefit within 14 days of submission of the application. You can find out about the decision from a county department of Töötukassa or it shall be sent electronically. Rates The unemployment insurance compensation is paid at a rate of 50% of the previous wage or salary for the first hundred days and thereafter at a rate of 40%. Because your previous wage is only taken into account up to a certain amount, there is a maximum limit as to how much unemployment benefit anyone can receive. There is also a minimum amount, which is set at half of the national minimum wage. Unemployment benefits from other countries If you come to Estonia to look for
work and are entitled to unemployment benefits in the country you have worked earlier you may be able to have your benefit transferred and paid out in Estonia for a period of three months. In order to arrange this, you first must contact the local employment office in the country where this right exists and discuss your intention to go look for work abroad. The authorities there will issue you with the necessary forms and instructions. When you arrive in Estonia, you must then register as soon as possible with Töötukassa in order to make sure you do not lose benefits. Please note that the benefits will be paid to you by the country where you received an unem-
ployment benefit earlier. Töötukassa job mediation services will then assist you in your job search and will also explain to you the procedures that apply and the conditions you will need to adhere to. These procedures and conditions are designed to ensure that you are actively looking for employment and that you are ready to start working when a job is offered. If you have become unemployed in Estonia, previous employment in other countries may be taken into account when your right to a benefit in Estonia is determined. To that end, you will need to obtain documents that prove your record from the countries you have worked in before.
You can get more information about the Labour Market Services and Benefits Act on the website of Riigi Teataja at www.riigiteataja.ee
4.2. Unemployment allowance If you do not meet the conditions to receive an unemployment insurance benefit, or if you have exhausted your rights to a benefit, you may still qualify for the unemployment allowance if you have worked for a minimum of 180 days during the previous calendar year. There may be other grounds to qualify for the unemployment benefit and it is advisable to contact a consultant of Töötukassa for more detailed info. Unemployment allowance in Estonia is governed by the Labour Market Services and Benefits Act. Rates The unemployment allowance is paid for a maximum period of 270 days. The conditions are different than those for the unemployment insurance benefit and are somewhat more complicated due to the existence of many exceptions. Who qualifies? Summarised, the
unemployment
allowance is paid to unemployed persons who do not qualify for the unemployment insurance benefit, who actively look for work, who have worked or finished full-time studies, and who have an income that is less than the allowance. The requirement to be involuntarily unemployment does not apply. How to apply? To request the unemployment allowance, you need to submit an application to Töötukassa, which you can do through the local office where you are registered or submit application online via e-Töötukassa (www.tootukassa.ee/eng/tkauth/ login). You can not receive the unemployment insurance benefit and the unemployment allowance together. However, you can apply for unemployment insurance benefit and unemployment allowance at the same time. Töötukassa will then check for which of the two you qualify
In what cases is unemployment allowance paid? What is the difference between unemployment allowance and unemployment insurance?
Who are entitled to parental benefit in Estonia?
4.3. Parental benefit Parental benefit enables one of the parents to stay at home after the childbirth, to care for the child, while also preserving the parent’s average salary for 18 months. Parental benefit is available for permanent residents of Estonia and foreigners living in Estonia with a temporary residence permit or a temporary right of residence. Before the child attains 70 days of age, only the mother raising the child is entitled to the benefit; thereafter, the parents can use the right to the benefit alternately.
Amount of the benefit The amount of the benefit is 100% of the average income per calendar month, based on the incomes of the calendar year preceding the day of incurring the right to the benefit. The benefit is based on the salary of the person receiving the benefit. The maximum amount of parental benefit is triple the average salary established by the government. Parental benefit is taxable by income tax.
How big is parental benefit?
If the preceding year’s income was below the minimum monthly salary established by the government, the 39
How long is parental benefit paid?
parental benefit is set to equal the minimum monthly salary. If there was no income taxable by social tax at all, the benefit is set to the benefit rate (430 euros in 2017). The period of getting parental benefit The benefit is paid for 435 days i.e. about 14.5 months.
How to apply for parental benefit?
Applying To apply for parental benefit, the applicant needs to file an application and present a personal ID document to the Social Insurance Board. The application can be filed personally in the Social Insurance Board’s service outlet or sent by mail. It can also be filed electronically in the State Portal: www.eesti.ee To file an application, log into the eesti.ee portal. Then:
• Select “Services” (“E-teenused”) from the menu
• Select the section “For a citizen” (“Kodanikule”)
• Select the subsection “Family” (“Perekond”)
• Select “Application for paren-
tal benefit, family allowances and additional contributions to the pension system” (“Vanemahüvitise, peretoetuste ja kohustusliku kogumispensioni täiendavate sissemaksete taotlemine”)
40
• Select “Applying for allowances
and benefits” (“Taotlen toetuseid ja hüvitisi”) from the (Estonian) menu at the bottom of the page
• Check the box in front of “Parental benefit” (“Vanemahüvitis”) in the section “My children and applying for benefits” (“Minu lapsed ja toetuste taotlemine”).
The application form is also available in the Social Insurance Board’s service outlets (the addresses and open hours of service outlets are provided on the Social Insurance Board’s website https:// w w w. s o t s i a a l k i n d l u s t u s a m e t .e e /et section “Client Service”) or on its website, section “Forms”. To change the recipient of parental benefit, the new applicant files an application and the current recipient grants his or her consent. If the application and the consent are filed before the 15th day of the month, the recipient will change starting with the next month, otherwise starting with the month after the next.
Part V: Entrepreneurship in Estonia Part V of the material provides an overview of the Estonian economy and business environment. It introduces the opportunities to found a company, as well as various possible legal forms of companies. A short overview is provided about the requirements for accounting and au-
What makes Estonian business environment attractive?
diting as well as opportunities to find suitable employees, office premises and funding sources for a company. The material also introduces the Company Registration Portal and the organisations supporting entrepreneurship, enterprise networks and Estonian start-up community.
5.1. Economic and business environment Estonia has an investment-friendly taxation system and transparent and functioning legislation. High degree of economic freedom, low national debt, belonging to the euro zone, low cor-
ruption index, e-variety of e-services, mobile communications and internet applications – all these factors show that Estonia has a stable and innovative business environment.
GDP by areas of activity and consumption components, 2018 Current prices, million euros
Share of total added value, %
Agriculture, forestry and fishery
572,2
2,6
Mining industry
239,8
1,1
Processing industry
3427,2
15,4
Electricity and natural gas supply
778,6
3,5
Water supply; waste handling
190,9
0,9
Construction
1722,8
7,7
Wholesale and retail trade
2619,2
11,7
Transportation and warehousing
1636,9
7,3
Accommodation and catering
447,0
2,0
Information and communication
1347,6
6,0
Financial and insurance activities
877,3
3,9
Real estate activities
2246,3
10,1
Professional, research and technology activities
1336,3
6,0
841,3
3,8
Public administration and national defence
1520,5
6,8
Education
1054,4
4,7
Healthcare and social welfare
903,5
4,1
Arts, recreation and free time
340,7
1,5
Other service activities
200,8
0,9
Administrative and helper activities
41
As we have modest market volumes, there is no artificial protection of our own market participants. Therefore there is a large number of foreign investors doing business in Estonia – in 2017 exports represented as much as 79% of Estonian GDP. To mention but a few, Ericsson, ABB, Kuehne + Nagel, Stora Enso, Microsoft, Symantec, Stoneridge, Vopak EOS, Deutsche Post DHL, Transferwise. The fact that Estonian banks are mostly owned by well-known Nordic banks,
such as Swedbank, Nordea and SEB, also speaks in favour of the reliability of Estonia’s business environment. What does Estonian economy consist of? In Estonia, the most added value is created in the processing industry (the proportion of industry to the entire economy is higher in Estonia than on average in the EU and the OECD countries), followed by trade and real estate activities.
5.2. Estonian export The most important export markets in 2018 were Finland with 16%, Sweden with 11%, Latvia with 10%, USA with 6% and Germany with 6%. So, all our most important export destination countries are situated near us.
also includes the export of 246 million euros of electricity. The third place among goods groups being exported is held by timber products. In 2017, Estonia was Europe’s
Figure 11. Estonia’s main trade partners (2018)
16% 30%
11%
3%
10%
Latvia Sweden Latvia USA Germany Russia Lithuania Norway Denmark Netherlands other
3% 4% 5%
6% 6%
6%
Among goods groups, the most important export sector of 2018 was that of electrical appliances and equipment with 2,28 billion euros of turnover and a 22% share in total export. The export of mining industry in 2018 was 2,16 billion euros i.e. 15% of total export. The row of mineral products
largest exporter of modular timber houses. There is also significant export of machines, mechanical appliances and their parts from Estonia. In addition to good, Estonia is also an active exporter of services in the fields of tourism, construction, transport and others.
5.3. Setting up a company It is easy to start your own company in Estonia. You can do this in person or online, and paperwork takes only a few days. For online registration, an ID card is required for authentication and
42
digital signing. The Commercial Code regulates establishing a company.
Legal form
According to the Commercial Code there are five forms of business entities, which are created by entry into the Commercial Register: private limited company, public limited company, general partnership, limited partnership, or commercial association. The most popular type of legal entity being set up by foreigners in Estonia is the so-called “Osaühing, OÜ”, or private limited company. Private Limited Company (Osaühing or OÜ) A private limited company is a company that has its share capital (in Estonian: osakapital) divided into private limited company shares (in Estonian: osad). A shareholder is not personally liable for the obligations of the company. A private limited company is liable for the performance of its obligations with all of its assets. The share capital must be a minimum of EUR 2,500. The minimum nominal value of a share is EUR 1. If the founders are private persons and the share capital is less than EUR 25,000 then the founders can decide that the contribution must not be paid upon the establishing of the company. Until the whole sum has been paid, the founders are personally liable for the obligations of the company within the amount of the missing contribution. A private limited company must have a management board. The management board is a directing body of the private limited company that represents and directs the private limited company. The management board may have one member (director) or several members. A member of the management board need not be a shareholder. A member of the management board must be a natural person with active legal capacity. If more than half of board members are not residing in Estonia then the company must give the Commercial Register has a contact in Estonia where necessary documents can be sent. The foreign owner must give the Commercial Register his/her address and e-mail address. A private limited company can have a supervisor board if prescribed by the Articles of Association. But it is not mandatory by the law. A private limited company must have an auditor if prescribed by law or the Articles of Association. An auditor is also mandatory when the company surpasses certain threshold values in terms of
turnover, number of employees and asset value. The process of establishing a private limited company
• Choosing and checking the busi-
ness name from the Commercial Register
• Registration of the company: • Electronic filing request to the
Commercial Register (possible for the holders of Estonian, Portuguese, Finnish and Belgian ID-card or Lithuanian Mobile-ID);
You can get more information about the Commercial Code on the website of Riigi Teataja at www.riigiteataja.ee
OR
• Verification of foundation
documents by the notary who will present those to the Commercial Register.
• Acquiring licenses if the area of activity is subject to special requirements. Information and electronic registration (in Estonian) at the Register of Economic Activities https://mtr.mkm.ee/
• Registration of the company as a
VAT payer at the Estonian Tax and Customs Board (if necessary)
How big must a private limited company’s share capital be? How is a private limited company founded?
• Registration of the employees
in the employee registry at the Estonian Tax and Customs Board
Entry in Commercial Register In order to enter a private limited company in the Commercial Register, the management board must submit a petition to the Commercial Register. If registered electronically, a company can be established in just a few hours. Registering through a notary will take up to 3 days. The state fee for registering a private limited company online is EUR 190. Entries in the Commercial Register are public. Everyone has the right to examine the registry cards and the business files, and to obtain copies of registry cards and of documents in the business files.
You can file an electronic request (in Estonian and English): http://ettevotjaportaal.rik.ee
List of notaries is available at www.notar.ee/19765
Find out more details about founding a company and the various types of companies that are available in Estonia (in English):
Other forms of legal persons are also possible. The most common ones include: Public Limited Company (Aktsiaselts or AS) A public limited company is a company that has a share capital (in Estonian: aktsiakapital) divided into public limited company shares (in Estonian: aktsiad). A shareholder is not personally liable for the obligations of the public limited company. A public limited 43
company is liable for the performance of its obligations with all of its assets. One or more natural or legal persons with or without share subscription may found a public limited company. Share capital must be a minimum of EUR 25,000 and the minimum nominal value of a share should be EUR 0.1. Shares must be registered and entered in the Estonian Central Register of Securities. The rights attached to registered shares belong to the person who is entered as the shareholder in the share register. A public limited company must have a management board and a supervisory board. The management board is a directing body of the public limited company that represents and directs the public limited company. A member of the management board need not be a shareholder. The management board may have one member (director) or several members. A member of the management board must be a natural person with active legal capacity. A member of the supervisory board must not be a member of the management board. If more than half of board members are not residing in Estonia then the company must give the Commercial Register a contact in Estonia where necessary documents can be sent. The foreign owner must give the Commercial Register his/her address and e-mail address.
Branch of Foreign Company If a foreign commercial undertaking wants to permanently offer goods or services in its own name in Estonia, it should enter its branch in the Commercial Register. A branch is not a legal person. The company is liable for the obligations arising from the activities of the branch. In the cases provided by law, a company must obtain a licence in order to found a branch in Estonia. A foreign company must appoint a director or directors for the branch. A director must be a natural person with active legal capacity. The residence of at least one director must be in Estonia, in a member state of EEA or in Swiss Confederation. If several directors are appointed for a branch, each of them may represent the branch unless it is specified that the directors or some of them may represent the branch jointly. A foreign company must maintain separate accounts concerning the branch. Accounts concerning the branch must be maintained pursuant to the requirements of the Accounting Act.
The supervisory board must plan the activities of the public limited company, organise the management of the public limited company and supervise the activities of the management board. The supervisory board must notify the general meeting of the results of a review. The supervisory board must give orders to the management board for organisation of the management of the public limited company. The supervisory board must have three members unless the Articles of Association prescribe a greater number of members. A member of the supervisory board must be a natural person with active legal capacity.
E-residency
A public limited company must appoint an auditor.
• Digitally
Sole Proprietorship (Füüsilisest Isikust Ettevõtja or FIE) A sole proprietor must be entered in the Commercial Register on his or her petition, or on another basis provided by law. A sole proprietor is liable for 44
his or her obligations with all of his or her assets. This means that in case of unmet obligations or bankruptcy, all property belonging to the Sole Proprietor can be used as collateral regardless of whether that property was used for business or private purposes.
e-Residency offers to every world citizen a government-issued digital identity and the opportunity to run a trusted company online, unleashing the world’s entrepreneurial potential.“ The Republic of Estonia is the first country to offer e-Residency — a transnational digital identity available to anyone in the world interested in administering a location-independent business online. e-Residency additionally enables secure and convenient digital services that facilitate credibility and trust online. e-Residents can: contracts
sign
documents
and
• Verify the authenticity of signed
documents Encrypt and transmit documents securely
• Establish an Estonian compa-
ny online within a day. At the moment a physical address in
Estonia is required, which may be obtained using an external service provider.
• Administer the company from anywhere in the world.
• Conduct e-banking and remote
money transfers. Establishing an Estonian bank account currently requires one in-person meeting at the bank, and is at the sole discretion of our banking partners.
• Access online payment service providers
• Declare Estonian taxes online.
e-Residency does not automatically establish tax residency. To learn about taxation and to avoid double taxation please consult a tax professional.
All of these services have been available to Estonians for over a decade. By offering e-Residents the same services, Estonia is proudly pioneering the idea of a country without borders. e-Residents receive a smart ID card which provides:
• digital identification and authentication to secure services
• digital signing of documents • digital verification of document authenticity
• document encryption
Activity licenses When founding a company, keep in mind that there are fields of activities with special requirements where you will need to apply for an activity license (there is a license obligation) or file a notice of economic activity (there is a notification obligation). In cases set out in the law, an entrepreneur is obligated to file a notice of starting an economic activity with the registrar before starting that activity. Also, in other cases set out in the law, an entrepreneur must have an activity license before starting economic activities in certain fields. Activity licenses are required for example for the following activities:
• • • • • • • •
construction; financial and insurance activities; information and communication; selling alcohol and tobacco; media; agriculture; transport and industry; energy.
Registering a field of activity with special requirements Verify whether your field of activity is listed among those with special requirements. The list of activities with special requirements (in Estonian) is here:
•
Pay the state fee for filing an application for an activity license. The state fees for different activity licenses are different. File a notice or application for being active in a field with special requirements, logging into the Register of Economic Activities or into another relevant register. The application forms to register for fields of activities with special requirements are available here (in Estonian):
•
https://mtr.mkm.ee/ File a notice or application for being active in a field with special requirements, sending it to a registrar, a state authority (for example, a ministry or department), or local government, depending on the field. See here about whom to send the application (in Estonian):
••
••
Time taken by registration After you file a notice of economic activity in the state portal or through that directly in the register, the data are automatically entered into the Register of Economic Activities or a similar register. Notices of economic activity sent in any other way are entered into the register by the registrar on the workday following the receipt of the notice. The economic administration authority normally reviews an application for an activity license within 30 days and if the license is granted, it will enter its data into the Register of Economic Activities or a similar register. Notification obligation If you are active in a field with special requirement, your activity must comply at all times with the requirements that were the basis for applying for an activity license or for sending an activity notice. If your company does not comply with the requirements, the authority co-ordinating the granting of licenses may refuse to grant the activity license or may suspend the license or revoke it.
What is an activity license?
What are the stages of registering for a field of activity with special requirements?
If the data of the notice of economic activity change, the registrar must be informed about it within 5 workdays. 45
If the data of an activity license change, the economic administration authority must normally be informed about it 30 days before the planned change.
Most important legislation related to entrepreneurship • Commercial Code
• General Part of the Civil Code Act
• Law of Obligations Act
• Law of Property Act
• Employment Contracts Act
• Bankruptcy Act
Accounting requirements The Law on Accounting regulates basic accounting functions in all business entities registered in Estonia. It does not regulate accounting for taxes, which are regulated by other laws and acts. The essence of the law is framed in compliance with International Accounting Standards (IAS). Almost all Estonian companies can choose whether to prepare their consolidated and annual accounts in accordance with International Financial Reporting Standards (IFRS) or in accordance with the Estonian accounting standards (“Estonian GAAP”). Listed companies and financial institutions are required to prepare their accounts in accordance with IFRS. The Estonian GAAP is written by the Estonian Accounting Standards Board. The length of a financial year is 12 months. At the end of each financial year, an accounting entity is required to prepare an annual report that consists of the annual accounts and the management report. The auditor’s report and, in the case of a company, the profit distribution proposal for the financial year should be annexed to the annual report. The auditor’s report need not be annexed to the annual report if auditing is not compulsory. Annual report should be filed at the Commercial Register during six months after the end of the financial year.
• Occupational Health and Safety Act
• Accounting Act
Auditing The financial statements should be audited for all public limited companies and foundations. In addition to that an accounting entity should be audited if, at the balance sheet date of the accounting year, the accounting entity exceeds the limits of at least two of the three following criteria:
• sales revenue (net turnover), in the case of a company, or income, in the case of other accounting entities EUR 4 Million;
• total assets EUR 2 Million; • number of employees 60. 46
Or if the accounting identity exceeds the limit of one of the three following criteria:
• sales revenue (net turnover), in the case of a company, or income, in the case of other accounting entities EUR 12 Million;
• total assets EUR 6 Million; • number of employees 180. The financial statements of an accounting entity should be reviewed by an auditor if, at the balance sheet date of the accounting year, the accounting entity exceeds the limits of at least two of the three following criteria:
• sales revenue (net turnover), in the case of a company, or income, in the case of other accounting entities EUR 1 Million;
• total assets EUR 0.8 Million; • number of employees 24. Or if the accounting identity exceeds the limit of one of the three following criteria:
• sales revenue (net turnover), in the
case of a company, or income, in the case of other accounting entities EUR 4.8 Million;
• total assets EUR 2.4 Million; number of employees 72.
A compulsory review may be replaced by an audit. Finding suitable staff Potential sources of finding suitable staff:
• Töötukassa offers free of charge
services to employers by looking for workers who meet the criteria they submit;
• private
recruitment companies can help in finding necessary specialists;
• one can advertise in national and local papers. Estonian Newspaper Association unites all the biggest newspapers in Estonia;
• careers services of main univer-
sities are one possibility to find employees.
Remuneration The average wage in Estonia in 2019 1st quarter was 1,341 €. The monthly minimum wage for full-time work in 2019 is 540 €. Payment for overtime - additional remuneration per hour of overtime paid to an employee shall not be less than 50% of the rate of the hourly wage. Work during holidays may be com-
pensated either by offering time off or by extra remuneration of at least 50% of the wage rate. Work on public holidays is required to be compensated at a double rate. Debt financing Debt financing is basically an acquisition of funds by borrowing. In Estonia, debt financing is mainly provided by commercial banks. Major banks of Estonia offer a large range of services, whereas smaller banks concentrate on a specific range of services.
How long does registration take?
The Estonian commercial banking market is divided by four Scandinavian owned banks and one locally owned bank:
• Swedbank (Swedbank Group) with the biggest market share;
What is notification obligation?
• SEB Bank (SEB Group); • Luminor; • LHV In total there are seven licensed banks and 9 branches of foreign credit institutions in Estonia. Debt financing provided by banks can be divided into two categories, based on the type of loan you are seeking: short term debt financing and long term debt financing. Short Term debt financing is essentially to provide capital deficit businesses funds for a short-term period of no more than a year.
Read more about all these legal acts on the website of the Official Journal (Riigi Teataja): www.riigiteataja.ee
• An Overdraft is a short-term credit
that is bounded to the company’s current bank account. It allows the company to withdraw or spend more money than it has, up to an agreed limit, known as the “overdraft limit”. An overdraft is designed to meet the liquidity needs and balance irregular cash flow.
• Working Capital Loan (current capital loan) is a special purpose loan for short-term financing of additional needs in working capital.
• Loan for agricultural enterprises is
provided for companies in cooperation with the Rural Development Foundation (RDF). Credit institutions are granting financing for primary producers in the agricultural sector and issuing loans on favourable conditions. The purpose of this loan is to support agricultural producers and other undertakings operating in rural areas to assure better access to financial resources that are needed for development of the economic activity.
47
Long Term debt financing is a form of financing that is provided for a period of more than a year. Longterm financing services are provided to those business entities that face a shortage of capital. Investment loan is a long-term loan, the purpose of which is financing new projects such as acquisition of fixed assets or building office, warehouse or production facilities. The financed period for investment loans varies depending on the credit institution, but usually does not exceed 15 years. Start-up loan is meant for companies just starting in business that often have no strong assets. A start-up loan enables an entrepreneur to manage the business- and loan-related risks, as in comparison with ordinary loans they have to take smaller risks with their own property. Most of these loan types require collateral in order to secure the credit institution’s financing; in addition to a mortgage, the company can apply to Kredex for supplementary collateral to the extent of up to 75% of the credit amount. In the case of a rural life and agriculture loan, the company can apply to the Rural Development Foundation. These guarantees are meant for small and medium-sized enterprises that are just beginning their business or cannot secure a bank loan. In addition to the above-mentioned services, credit institutions also provide car and equipment leases and factoring services. Equity financing Equity financing is an alternative to debt financing and is basically an acquisition of funds by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. A company can finance equity through: Private equity companies financed by institutional investors (such as investType of space
ment banks, funds etc) and private investors. There is a wide array of private equity types and styles and the term ‘private equity’ has varying connotations in different countries. Premises There are no particular restrictions for foreigners acquiring immovables in Estonia. General restrictions fall into two main types according to the Restrictions on Acquisition of Immovables Act:
• restrictions arising from the acquisition of 10 hectares or more of agricultural or forested land;
• restrictions arising from national defence reasons.
The Government may grant authorisation to foreigners for acquisition of an immovable in one of the two categories above for reasons significant to the State. Renting The following table shows the indicative range for rents (excluding VAT and operating expenses) in major towns of Estonia for class A and B1 office premises, medium-size retail units in major shopping centres, and new and renovated warehouses (EUR/m2 per month): Class A -property under management by a professional management company, located in Downtown (Südalinn), completely new construction, fully controllable technical systems, reasonable column spacing, raised floors and suspended ceilings, a good underground parking ratio, corresponding infrastructure/amenities in the building (including cafeteria). Class B1 -reconstructed or newly constructed buildings with fully or partially replaced technical systems, located in City Centre (Kesklinn) or on the edge of the City Centre; possibility exists to install raised floors and suspended ceilings, western-standard interior fit-out, and surface parking. Broadband network Estonia has a highly developed telecommunications and IT infrastructure. A fibre optic backbone network con-
Tallinn
Tartu
Office
8 - 16
5-13
4,5-10
3,5-6,5
Retail
20 - 50
8-35
7-20
6-15
Industrial
3,8 - 8
3-5
2-5
2-5
Source: Ober-Haus-Market-Report-Baltic-States-2018
48
Pärnu
Narva
nects all Estonian country centres. Almost all Estonian households, enterprises and institutions have access to broadband with a data connection speed of up to 100 Mbit/s. The Estonian Broadband Development Foundation’s objective is to build a
network of fibre optic cables across Estonia to make that possible. Estonia is completely covered by digital networks providing wireless internet. A network of Public Access Points covers most cities and towns.
5.4. Company Registration Portal The Company Registration Portal is an Internet environment that allows entrepreneurs to submit electronic applications, documents and annual reports to the Commercial Register. Applications can only be signed using your ID-card or Mobile-ID. The services available on the Company Registration Portal
• The Company Registration Portal can be used to establish new businesses and non-profit organizations, and to submit applications to amend, liquidate or delete registry data.
• The company registration portal
includes e-annual reporting environment which can be used for compiling, signing and submitting annual reports.
• Political
party members can see their party affiliation in the Company Registration Portal and submit applications to resign from the party. After providing a digital
signature to the application, the applicant is automatically removed from the political party’s membership list.
• The company registration portal
also includes a simple web-based accounting software e-billing, which helps the start-ups and small business to organize their accounting comfortably.
Getting information about other companies
The Company Registration Portal is there (in Estonian and English): https://ettevotjaportaal.rik.ee/
The Commercial Register’s information system allows free queries about companies, non-profit associations and foundations. Read more here: https://ariregister.rik.ee/index?lang=eng (click ENG for English) On the Tax and Customs Board’s website you can see the list of legal entity debtors:
What actions are possible in the Company Registration Portal?
5.5. Organisations supporting entrepreneurship There are several organisations in Estonia that have the goal of supporting entrepreneurship – both companies only starting and those already active and expanding. These organisations offer entrepreneurs counselling, help in finding contacts and under certain conditions also various kinds of material support (e.g. guarantees, funding support, loans, etc.).
field of activity, but lack knowledge regarding entrepreneurship. Enterprise Estonia offers comprehensive information to starting businesses, starting with information on the web and ending with personal counselling under the mentoring programme. In addition, starting companies can apply for direct aid. Information on the web:
5.5.1. Enterprise Estonia (EAS) EAS is offering different support possibilities and solutions to help a starting entrepreneur kick-start their business. The emphasis in activities geared towards starting entrepreneurs is placed on increasing awareness and encouraging the potential entrepreneurs. Information and awareness are also at the forefront with already functioning entrepreneurs, which often possess extensive skills and knowledge in their
• Enterprise Estonia’s web for start-
ing entrepreneurs (in Estonian) provides information, services and training possibilities to a starting entrepreneur.
The website of EAS is there: www.eas.ee
• The information centre provides
general information on all support possibilities by fields.
• Entrepreneurship awareness pro-
ject grants support the projects that are aimed at increasing initiative and business activity in the society.
49
• Participation in the regional entre-
• the company is capable of growing
Trainings and counselling:
Up to 15,000 euros of start-up support can be applied for. The support’s proportion in the project’s total cost is maximum 80% and the self-funded part is at least 20%.
preneurship days and entrepreneurship week provides you with useful ideas, knowledge and confidence in starting your business.
• Enterprise Estonia’s offices in Tallinn, East and South Estonia to make contacting easier.
• County development centres give you free support on the questions related to starting a business and preparing a business plan.
• Business mentoring programme helps you find a personal mentor for your developing business.
20% per financial year, reaching at least 80,000 euros of sales revenue by the end of the third financial year.
The start-up support can be used for the acquisition of fixed assets, the implementation of marketing activities, the purchasing and development of software and the funding of labour costs in the project period.
• Regional mentoring clubs have On what conditions is startup support paid? Do these conditions seem realistically possible to meet?
experienced entrepreneurs from across Estonia sharing their knowledge.
• The Business Incubator is the best
place to start if you are an innovative, growth-oriented entrepreneur.
• Base training for a start-up enHow big is the start-up support?
Read more about applying for start-up support on the website of EAS at www.eas.ee
trepreneur – base knowledge for starting one’s own business. A business plan is compiled in the course of the training.
EAS start-up support Enterprise Estonia is offering different support possibilities and solutions to help a starting entrepreneur kick-start their business. In supporting starting businesses, EAS considers the following objectives: more starting entrepreneurs, a better survival rate for businesses and a larger number of fast-growing companies. The purpose of granting the start-up support is to help starting entrepreneurs with little business experience but high growth potential. The goal is to launch the companies and achieve the results as described in the business plan. A starting entrepreneur is invited to apply for the start-up support if:
• not more than 24 months have passed from founding;
the
company’s
• at least two jobs with the medi-
an gross salary (688 euros) are created;
• the business mode is well thought through and the business plan includes not only the business description but also the launch plan (action plan);
• the product or service is ready for starting the economic activity;
50
5.5.2. County development centres (Maakondlikud Arenduskeskused) County development centres (CDCs) are organisations located in all counties, offering free information and counselling services to companies. The clients of CDCs are enterprising people, potential and active entrepreneurs. CDCs work as networks; the role of network coordinator is played by Enterprise Estonia.
• CDCs support and guide the development through:
of
entrepreneurship
• Development of an entrepreneurial attitude;
• Supporting the establishment and development of new businesses;
• Spreading the knowledge and skills related to getting started in entrepreneurship.
In the field of entrepreneurship, CDCs provide the following services:
• Sharing information: • On support possibilities; • On entrepreneurship in county;
the
• On services of private market consultants.
• Counselling starting entrepreneurs in the following matters:
• How do you know if entrepreneurship is suitable for you?
• What are the risks, liabilities and responsibilities accompanying entrepreneurship?
• Is your business idea sufficiently thought through?
• How to start your own business? • How to assemble a team?
• How to prepare a business plan? • How to prepare financial
ceive that amount – what is granted depends on the eligible needs, as they are expressed in the business plan.
You can find more info about CDCs at their web page (in Estonian)
• Where to find sources to finance
In order to receive a business startup subsidy, you must be at least 18 years old, and be able to demonstrate some experience in running a business. That experience can be shown by referring to your past activities or education, or by completing a specific business training.
What kinds of services do CDCs provide?
prognoses?
your business idea?
• Counselling of active entrepreneurs in the following matters:
• Where to find project funding for your idea?
• What are the main conditions for support applications?
KredEx KredEx helps enterprises develop faster and expand safely to foreign markets, by offering loans, venture capital, credit insurance and state-guaranteed collaterals. KredEx offers solutions for enterprises just starting, in a growth phase or already proven themselves. KredEx secures and funds investments that help enterprises develop quickly. Read more:
https://www.kredex.ee/en
5.5.3. Business start-up subsidy by Töötukassa If you have a good idea, or a special skill you think you can turn into a business, you might want to consider starting your own enterprise. Töötukassa provides financial backing to registered unemployed persons who form new enterprises, through a business startup subsidy. The maximum amount of the subsidy depends on the available budget and on the needs of your new business. This does not mean that everyone who is granted the subsidy. The maximum amount of the subsidy depends on the available budget and on the needs of your new business. In 2019, the maximum is set to 4474 EUR. This does not mean that everyone who is granted the subsidy will re-
www.arenduskeskused.ee
As the subsidy is meant to create employment, one must be unemployed in order to qualify. Also, the subsidy is only given for the purpose of starting a new business, not for expanding or enhancing an existing economic activity or to invest in an existing company. The business start-up subsidy must be used for the intended purpose, as is expressed in the business plan. To make sure this is the case, the economic activity of the person who has received the subsidy is inspected at least twice a year, a first time within six months after the subsidy has been transferred. If you are unemployed and would like to start your own business, but lack qualifications or experience, you can enrol in a specific training programme. This business training includes teaching you how to develop a good business plan, and helps you to meet the criteria in order to apply for the business start-up subsidy. If you have already started your business with a business start-up subsidy, you can also benefit from trainings that can help you acquire the skills to increase the sustainability of your business and from guidance and mentoring by other successful entrepreneurs. If you are interested in participating in such opportunities, you can ask more information from your consultant.
Co-ordinator of county development centres: Kaido Sipelgas Tel: 627 9502 kaido.sipelgas@eas.ee
How big is the business startup subsidy?
On what conditions can one get business start-up subsidy from Töötukassa? How are those conditions different from the conditions of paying the EAS start-up support?
5.6. Enterprise networks Estonia has a very active entrepreneurship scene where many enterprises have created various networks and umbrella organisations. The main goal of such organisations is to promote the development of its members and the specific sector of the economy, discuss common problems, find solutions to those and exchange experiences.
Enterprise networks can be generalised (e.g. the Chamber of Commerce and Industry) or specific to an industry (e.g. the Estonian Association of Fishery or the Estonian Association of Information Technology and Telecommunications), but can also represent specific groups of people active in entrepreneurship (e.g. the Estonian Employers’ Confederation).
You can find all the contacts of Töötukassa and more info about business start-up subsidy on their website: www.tootukassa.ee
51
Why is it useful to join enterprise networks?
There are also a number of organisations and associations with a more social direction, connecting people with a similar worldview, often for the purpose of e.g. charity (for example, Rotary or Lions). One of the important goals of all such organisations is networking and thereby helping along their members’ economic and other activities. The rules for becoming a member are different in different organisations. For more information it is recommended to contact them directly. Some of the more important enterprise organisations:
• Estonian Chamber of Commerce and Industry – www.koda.ee
• Estonian Employers’
Confederation – https://www.employers.ee/en/
• Estonian Service Industry
Association – http://www.teenusmajandus.ee/ (in Estonian and English)
• Estonian Association of SMEs – www.evea.ee
• Finance Estonia –
www.financeestonia.eu (in English)
Examples of sector-specific enterprise organisations:
• Estonian Association of
Information Technology and Telecommunications – www.itl.ee (in Estonian and English)
• Estonian Forestry and Timber
Association – www.empl.ee (in Estonian and English)
• Estonian Association of
Construction Entrepreneurs – www.eeel.ee
• Estonian Traders Association – www.kaupmeesteliit.ee (in Estonian)
• Estonian Banking Association –
www.pangaliit.ee (in Estonian and English)
5.7. Start-ups The community2 Estonia is known as a good source of start-ups. Estonian entrepreneurs are innovators who are not afraid of new things. Estonia’s Tech Alumni wall of fame include Skype, Transferwise, Pipedrive, Cloutex, Click & Grow, Grabcad, Erply, Fortumo, Lingvist and more.
velopments started this May, when Estonian government decided to approve the electronic declaration of officials’ financial interests to reduce the risk of corruption and increase transparency. Not to mention NATO Cooperative Cyber Defence Centre of Excellence and IT-agency of the European Union is located in Tallinn.
Good economic environment Estonia is the most transparent and the least corrupt country in the CEE region (Transparency International Corruption Perception Index 2018, 18th out of 177 countries). Estonia’s economic freedom is regarded as one of the highest in the World and the best in the CEE region (Economic Freedom World Ranking, 11th out of 178 countries).
Organisations and communities you can access
There is a reason why the country has a nickname “E-stonia” Voting can be done from the living room couch, you can sign documents digitally, fill tax returns and follow your startup finance activities via web. The backbone of the system in Estonia is called The X-road. It is also worth mentioning that it was designed with growth in mind. One of the recent de-
• one-on-one coaching • advice from international specialists
2
52
Tehnopol The Startup Incubator Tehnopol helps implement the ideas of technology enterprises. Tehnopol focuses on the fields of ICT, environmental technology, mechatronics and natural sciences. Tehnopol offers:
• the Startup Academy with train-
ers from among the tops of Estonia and abroad
• access to a contact network (business angels, investors)
• help in funding customers and partners from abroad
https://e-estonia.com/why-is-estonia-a-startup-paradise/
• prototyping opportunities • furnished offices and collabora-
es. The prerequisites for joining the incubation package are:
• help with applying for funds
with marketing and economy skills being represented),
• events, seminars, training courses
• the leading creative person having
Estonian Business Angels Network EstBan Estonian Business Angels Network, established in late 2012, is an umbrella organization for business angels and business angel groups seeking investment opportunities in Estonia and its neighbouring regions with an aim to grow the quantity and quality of local seed stage investments. htttp://www.estban.ee/en
• the planned product/service be-
tion rooms in Estonia and abroad from Prototron
and business missions.
Startup Wiseguys Startup Wise Guys BusinessTech is the leading B2B, SaaS accelerator in Europe & located in Tallinn, Estonia. They connect innovative and ambitious startups from around the world to experts from Europe and the US. www.startupwiseguys.com/ Incubator Tallinn The incubator programme awaits enterprises wishing to develop and reach new markets. Incubation is of the greatest help to growth enterpris-
What are the most wellknown Estonian start-ups?
• a team of 2-3 members (ideally
high professional competences and being recognised in the field;
ing based on a creative approach, technology, material concept or business model enabling to develop a competitive edge;
Why is Estonia a good place for start-ups?
• the team’s ambition to apply their professional skills entrepreneurship.
profitably
in
Read more: https://inkubaator.tallinn.ee/en/ Other information sources and organisations related to the start-up community:
• Estonian Startup Leaders Club www.startupleadersclub.com
• Startup Estonia
www.arengufond.ee/en/startup-estonia/overview (in Estonian and English)
• Garage48
https://garage48.org/
53
Links and useful resources Töötukassa: www.tootukassa.ee – an overview of labour market services Ministry of Social Affairs: www.sm.ee – the official website of the Ministry of Social Affairs EURES Platform: www.eures.ee – pan-European labour mediation network for jobseekers and employers Jurist aitab: www.juristaitab.ee – legal advice in everyday matters Estonian Trade Union Confederation: www.eakl.ee Labour Inspectorate: www.ti.ee – state supervision over work environment CrossCulture: www.crossculture.com – cross cultural advisory portal International Organization for Migration: www.iom.ee/estco/failid/File/ COHandbook2015/IOM_Handbo ok_ENG.pdf Enterprise Estonia: www.eas.ee - promotes business and regional policy in Estonia Pension Centre: www.pensionikeskus.ee – information about the pension system Social Insurance Board: www.sotsiaalkindlustusamet.ee Ministry of Education and Research: www.hm.ee/et/eesmargid-tegevused/ taiskasvanuharidus/äienduskoolitus ttka.hm.ee – information about in-service training Innove Foundation: www.innove.ee – education competence centre Innove Rajaleidja: www.rajaleidja.ee – career counselling portal Work in Estonia: www.workinestonia.com - guide to living and working in Estonia e-services gateway: www.eesti.ee – portal to various e-services Tax and Customs Board: www.emta.ee
54
