Sunny Business Services
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11314 Tallinn Estonia

Employees Taxation - Sunny Business Services

Personal income earned by employees is also subject to income tax and you must withhold and pay income tax on gross wages earned, extra payments, bonus pay, holiday pays and other payments that are regarded as wages.

The natural person income tax rate in 2021 is 20%. If an employee has filed an application to the person making the payments (employer) concerning the implementation of tax-free income, you can deduct the amount of tax-free income permitted per month when calculating the amount of income tax to be withheld.

In addition to income tax, the emplyer must withhold from the employee´s income the mandatory funded pension payment and unemployment insurance payment. Besides, social tax should be paid from gross wages of an employee.

Revenue from social tax is used to fund pension insurance and state health care. Social tax is to be paid by an entrepreneur (employer) for an employee.

The social tax rate is 33% of the employee’s gross earnings (for instance, in the case of 1,000 euros in gross earnings, you pay 330 euros of social tax for the employee).

The taxation period is a calendar month and by the 10th of the subsequent month, you will have to declare and pay social tax to the Tax and Customs Board.

An employer is required to pay social tax on wages as well as on fringe benefits.