Taxation of the salary and wages of foreigners in Estonia

Upon the taxation of the salary and wages of foreigners in Estonia, it has to be taken into account whether the employee is a posted worker or an employee on a business trip, and also how long the employee is staying in Estonia.

The posted worker is distinguished from the employee on a business trip mostly by the circumstance that the posted worker always has a particular receiver or service recipient, for example, the parent company or subsidiary of the group.

The posted worker

A person is considered to be a posted worker if:

  • the place of performance of work is Estonia, not the foreign country where the employee normally works in;
  • employment is temporary, it means the employee does not move to Estonia to live and work permanently;
  • the employee has a particular receiver in Estonia or the service recipient, for example, the parent or subsidiary company of the group.

The employee on a business trip

A person is considered to be an employee on a business trip if the employer sends the employee to Estonia from the place of employment they have agreed on to perform work duties. This generally lasts for no more than 30 consecutive calendar days.

The employee and the employer may also agree upon a longer time period for the business trip.


Figure 1 (the employer is a foreign company) and figure 2 (the employer is an Estonian company or a non-resident acting as an employer in Estonia or a non-resident's permanent establishment in Estonia) give an overview of the taxation of the salary and wages.

Overview of payroll taxation


Taxation of the salary and wages of an employee on a business trip (non-resident) and a posted worker (non-resident) when the employer is a foreign company (non-resident) (Figure  1).

 
 
Taxation of the salary and wages of resident employees and non-resident employees in Estonia when the employer is an Estonian company or a non-resident acting as an employer in Estonia or a non-resident’s permanent establishment in Estonia (Figure 2).

* As of 1 January 2022, a natural person resident in a member state of the European Economic Area (EEA) (EU Member States, Iceland, Liechtenstein, Norway) has the right to deduct basic exemption from the remuneration which he or she monthly receives in the same way as a resident of Estonia. For this purpose, a non-resident must submit his or her certificate of residency to the Tax and Customs Board and an application to the employer for the application of Estonian basic exemption (up to 500 euros).

A non-resident natural person who is an EEA resident has the right to submit an income tax return for 2021 in order to apply Estonia’s basic exemption and recover the income tax overpaid in Estonia.

The terms “temporary agency work” and “user undertaking” are explained in the Employment Contracts Act and the guidance documents of the Labour Inspectorate. The Income Tax Act does not give any special meaning to these terms in tax law.

Last updated: 02.12.2021

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