In 2018 several changes come into force in Estonian tax system and almost every company and person will be influenced by the changes to some extent.
Changes for companies
Starting next year companies will have tax rates of 20% and 14% for taxable distributable profit and non-taxable profit. Read more here.
For company cars that are also used for private matters, a fringe benefit tax will be calculated based on vehicles capacity from 2018. The tax is going to be 1.96€/kW (1.47€/kW for vehicles older than 5 years) and it doesn’t depend on the volume of private use.
On a brighter note some of the changes also result in limited tax exemptions.
- From 2018 employers are entitled to support the activities related to employee’s health with 100€ per quarter per each employee exempt from fringe benefit tax. The exemption is only valid if all employees have an option to use the opportunities, but the tax free amount is calculated based on the number of employees actually using them.
- If employee’s residence is at least 50km away from the working place, the employer now has the right to reimburse some the accommodation costs without paying fringe benefits (up to 200€ monthly in Tallinn and Tartu and 100€ monthly elsewhere in Estonia).
- If employee lives at least 50km away from the working place the employer can now reimburse the cost of transportation without paying fringe benefits. And as an extra option the employer can also arrange the transportation for employees living closer without paying fringe benefits if using a vehicle with at least 8 seats.
Changes for private persons
The personal income tax will remain to 20% on 2018, but a change affecting everybody, earning salary in Estonia is, that from next year the procedure for calculating the income tax basic exemption will change. The amount of basic exemption will be dependent on person’s annual income and will range from 0€ to 6000€. The annual income includes salary as well as dividend – and rental income, pensions, foreign income etc.
The social tax rate remains 33% and the minimum monthly social tax deduction is raised to 470€, which equals to the minimum social tax liability of 155,10€ per month.
For further information and exact calculations for your company or personal income, please consult your accountant.