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%).

670 Figure 1. Number of employees (thousand)

642,5

615

587,5

560

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Figure 2. Education level of employees

10%

41%

1

Tertiary education Secondary, post-secondary or pre-tertiry education Tertiary education

49%

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 Figure 3. Number of employees by areas of activity (thousand)

Agriculture, shing, 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 10 20 30 40 50 60 70 80 90 100 110 120 130

According to Statistics Estonia, the unemployment rate in Estonia in 1st quarter of 2019 was 4,7%. The unemployment rate was the highest among young people with basic education and the lowest among people with higher education.

1.2. Legal bases of working in Estonia

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

With a residence permit

Working in Estonia With right of residence Temporary residence permit for work

Temporary residence permit for entrepreneurship

Short-term work (up to 12 months per year)

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.

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. https://www2.politsei.ee/en/teenused/ working-in-estonia/registration-ofshort-term-employment/

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

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 ofDetailed info about legal requirements for foreigners working in Estonia is on the PPA website:

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.

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/

Read more about how to create your start-up company to Estonia: http://startupestonia.ee/

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.

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 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 employment contract with the term of at least one year with the foreigner 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 management 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.

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 officially 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 In what cases is it forbidden for a foreigner to work in Estonia?

What are the key characteristics of Estonian work culture?

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 proportions. 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

What should you keep in mind about Estonian working culture? 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.

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 agreements 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.

What are the state taxes established in Estonia?

What are the possible local taxes in Estonia?

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.

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 insurance contributions, • 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 treasury. 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).

50%

45%

40% Finland EU average Estonia Latvia Lithuania

35%

30%

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. 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; 25%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Eurostat

Figure 10. Tax burden by economic functions, (%)

60%

50%

40%

30%

20%

10% Labour force, Estonia Labour force, EU average Consumption, Estonia Consumption, EU average Capital, EU average Capital, Estonia

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; What are the most important natural person taxes in Estonia?

• 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 from 14 400 euros to 25 200 euros, basic exemption decreases 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.

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.

You should never accept undeclared cash payments, if such are offered

according to the following formula: 6000 – 6000 ÷ 10 800 × (income amount – 14 400) • 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

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.

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: • 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 - deadline for submission of the TSD declaration: declaration of income and social tax, unemployment insurHow 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

What is the specific feature of company income tax in Estonia?

When must a company be registered as a value added tax payer? What does this entail?

Detailed information on Value Added Tax (VAT) ance premiums and contributions to mandatory funded pension • * 20th day of every month - deadline for the submission of the Vlaue Added Tax declaration

For private persons • * 31st of March every year - deadline 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. registered as a value added tax payer in the Tax and Customs Board. If the turnover is less, the registration is not obligatory.

As a value added tax payer, you will have to: • add the value added tax to the sales 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.

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.

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 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.

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.

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 supervisory board of a legal entity; • A person employed on the basis of a contract under the law of obligations; • A person registered at Töötukassa (Estonian Unemployment Insurance Fund); • 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; You can find more info about taxes in Estonia on the web page of Estonian Tax and Customs Board: www.emta.ee

You can get more information about the Health Insurance Act on the website of Riigi Teataja at www.riigiteataja.ee

Who has health insurance in Estonia?

• 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. possible to buy dental health insur- ance from insurance providers.

Examples of health insurance services offered by insurance providers: ERGO • Compensation for sickness days You are obligated to immediately in- form your family physician if you fall ill. After examining you, the family phy- sician 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 em- ployee must inform his or her employ- er 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

Not compensated Employer compensates 70% of the employee’s average pay The Health Insurance Fund compensates 70% of the previous calendar year’sincome taxable by social tax Not compensated

1 2 3 4 … 8 9 … 182 183

The insurance premium is calcu- lated on the basis of Estonia’s aver- age 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 cal- endar month. The premium in 2016: 1 month 138,50 euro, 1 quarter year 415,50 euro, 1 year 1,662 euro).

You can check whether you are in- sured or not by logging into the state e-portal www.eesti.ee and accessing “My Data” (ENG). The insured per- son 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 insur- ance, private health insurance ser- vices are also available in Estonia. Voluntary health insurance is intend- ed for those who have no state health insurance from the Health Insurance Fund. Voluntary health insurance cov- ers medical treatment costs. It is also 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 employ- ee. 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 occu- pational 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)

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 per

Read more about health insurance in Estonia on the Estonian Health Insurance Fund’s website: www.haigekassa.ee

On what conditions is state old-age pension paid?

How is the I pillar of the pension system funded?

How big is Estonian average pension in 2017?

How is the II pillar of the pension system funded?

How is the mandatory funded pension paid out?

What is supplementary funded pension? sonal identity document. Registration by date of birth does not grant the employee with social guarantees, including health insurance.

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

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

III pillar: Supplementary funded pension

I pillar: State 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 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 in- surance contract or to a bank in order to receive payments from the pension fund. Before submitting an applica- tion, the total value of the shares must be established. It can be done through the My Account section of www.pen- sionikeskus.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 sub- scribed to the mandatory funded pension, which holds information re- garding his or her second pillar: ap- plications 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 ap- plication 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 per- son, 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 ap- plication 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 in- crease their pension via optional sup- plementary contributions.

There are two options for subscribing to the supplementary funded pension: • conclude a pension insurance contract with a life insurance company or

There are also two options for receiv- ing payments: • payments on the basis of the insur- ance contract or • payments from the voluntary pen- sion 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 contri- butions to the supplementary fund- ed 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 pen- sion if he or she is a permanent res- ident 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 ap- plication 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