Several important amendments to the law will come into force in 2017. Here are seven amendments that business people should be aware in the new business year.
1. The reduction in the social tax was canceled
As of January 1st, the social tax was supposed to be reduced from the current 33% to 32.5%. As a result, employers would have saved about €42 million per year. The Riigikogu passed a legislation bundle of tax-related amendments in mid-December, which canceled the planned reduction in social tax. Therefore, the social tax rate will remain at 33% in 2017. See more.
2. Minimum wage increases to €470
As of January 1st, the minimum wage for full-time employees will increase for €430 to €470 per month. The minimum hourly wage as of January 1st will be €2.78 (currently €2.54). See more.
3. The mandatory transition to e-invoice will be postponed
Previously, as of January 1st, the state had wanted to require businesses to submit invoices to the public sector only in the form of e-invoices (machine-readable invoices, not PDF invoices) sgwjoy1. At the last minute, the state postponed the enactment of this requirement for an indefinite period because the market is not yet prepared for this change. This means that in 2017, businesses are still allowed to submit both paper and PDF invoices to the public sector.
Pursuant to the Accounting Act, the public sector must be ready to accept e-invoices as of 1 March 2017. See more.
4. The restrictions on foreigners working in Estonia will be simplified
In mid-January, several important amendments to the Aliens Act will come into force, whereby working and conducting business in Estonia will be simplified for third-country nationals.
- For example, the requirement to pay foreign employees 1.24 times the Estonian average wage will disappear zwpsp1w. This will be replaced with an obligation to pay the Estonian average wage.
- As of January 18th, large investors, or foreigners who have invested at least €1 million in Estonia, will be allowed to apply for a residence permit based on a simplified procedure and large investors will be exempted from the immigration quota.
- In addition, hereafter those foreigners who work in Estonia in the ICT field or in startups will also be exempted from the immigration quota.
- As of January 18th, foreigners will no longer have to register absences from Estonia that last more than 183 day with the Police and Border Guard Board. In addition, foreigners will be given the right to work in Estonia on a short-term basis for 270 days per years, instead of the current 180 days.
See more: Amendments
5. Sickness benefits for the second and third sick day exempted from social tax
As of January 1st, employers can pay sickness benefits for the second and third sick day that equals up to 100% of the employee’s average wages without having to pay social tax. This means that the employer can decide whether and how much compensation to pay for the second and third sick day. The employer is still obligated to pay sickness benefits for the fourth to eighth sick day that equals at least 70% of the employee’s average wages. See more.
6. Important amendments to the Income Tax Act
- The minimum income exempted from income tax will increase from €170 to €180 per month (€2,160 per year).
- The tax-free income threshold will be increased to €6,000 annually or €500 per month starting in 2018.
7. The minimum social tax obligation will increase to €141.90
As of January 1st, the monthly amount that establishes the basis for the minimum social tax obligation will increase to €430. This means that the employer must pay at least €141.90 in social tax in order to the employee to be covered by social insurance. See more.
- For small businesses, the good news is that preparing one’s annual report will become simpler.
- Accommodations providers will be satisfied that the VAT on accommodations services will not increase.
- Negative changes are related primarily to the tax laws. At the last minute, the state has decided to cancel the reduction of social tax by half a percent. In addition, the excise tax on natural gas will increase by 20% as of January 1st, and the excise tax on diesel fuel and petrol will increase by 10% as of February 1st.
Source: Estonian Chamber of Commerce and Industry