Social Tax

(Social Tax Act, effective January 1, 2001)

Tax Base

Employers pay social tax on payments in cash and in kind made to natural persons. Sole proprietors pay tax on their business income. Employers and sole proprietors are both obliged to pay social tax not less than the amount calculated from the monthly rate provided for in § 2¹ of the Social Tax Act (in 2010, the minimum monthly basis for social tax is 4350 EEK). Sole proprietors also have an upper limit- the maximum basis for social tax is the amount calculated from fifteen-fold minimum wage (in 2009 the minimum wage is 4350 EEK per month and the maximum basis for social tax payable by sole proprietors is thus 15*12 months*4350 EEK=  783 000 EEK).

The law enacts several special cases of paying social tax when the tax is paid by the state and the rural municipality or city, e.g. for persons receiving unemployment benefits or child care allowances.

Tax Rates

Social tax rate is generally 33 per cent, in particular special cases 13 per cent of the taxable amount. Taxes are due monthly and the remittance of tax is made congruent with the remittance of withholding tax; the tax is paid by the 10th day of the following month. Taxable period for business income of sole proprietors is a calendar year, whereas quarterly advance payments of tax are due.

Tax Allocation

From January 1, 1999 the social tax payable is personalised and in making pension payments will be taken into account. Tax accrues to the budget of state health insurance fund (13%) and pension insurance fund (20%; 16% + 4% in case of persons who have joined the second pillar of the pension insurance system).