Submission of declaration form TSD

Employee with an employment contract, wages or salaries or other similar payment 1000 euros (payment type 120)

Juhani is a Finnish tax resident receiving remuneration according to an employment contract in the gross amount of 1000 euros per month. He is not of Estonian retirement age. Juhani has submitted an application to the employer to apply the basic exemption of 700 euros per month.

Mandatory funded pension contributions (II pillar) cannot be withheld from payments made to a non-resident recipient.

As Juhani is tax resident of Finland (a Member State of the European Union), and a valid certificate of Juhani´s tax residency confirmed by the Finnish Tax Administration has been submitted to the Estonian Tax and Customs Board, the Estonian employer may apply the basic exemption as prescribed in the Estonian Income Tax Act when calculating the income tax amount to be withheld from the Estonian taxable income.

Tax calculation

• Social tax 1000 × 33% = 330 euros
• Withheld unemployment insurance premium 1000 × 1.6% = 16 euros
• Employer´s unemployment insurance premium 1000 × 0.8% = 8 euros
• Withheld income tax (1000 – 16 – 700) × 22% = 62.48 euros

Net payment of 921.52 euros (1000 – 16 – 62.48) is made to Juhani’s bank account.

Declaration in Annex 2 of form TSD

Exceptions in tax calculation

• If an employee is of the Estonian retirement age, unemployment insurance premium (code 2130) is not withheld at the rate of 1.6 % from payment (16 euros in the example).

• If form A1 “Certificate concerning the social security legislation which applies to the holder” has been issued to an employee from a foreign country (country of the European Economic Area (Member State of the European Union (EU), Iceland, Liechtenstein, Norway) or Switzerland; Finland in the example) the country has to be indicated in code 2060 and Estonian social tax is not calculated in code 2110 (330 euros in the example) nor unemployment insurance premiums in code 2130 (16 euros in the example) nor in code 2140 (8 euros in the example).

Basic exemption cannot be applied

• If there is no valid certificate of tax residency certified by the tax authorities of a country of the European Economic Area (Member State of the EU, Iceland, Liechtenstein, Norway; Finland in the example), it is not allowed to apply the basic exemption amount in codes 2154 and 2155 (700 euros in the example).

• Upon calculating the withheld income tax in Estonia, the basic exemption cannot be applied on payments made to tax residents of third countries (countries not mentioned in the previous clause).

Tax calculation

• Social tax 1000 × 33% = 330 euros
• Withheld unemployment insurance premium 1000 × 1.6% = 16 euros
• Employer´s unemployment insurance premium 1000 × 0.8% = 8 euros
• Withheld income tax (1000 – 16) × 22% = 216.48 euros
• Basic exemption cannot be applied and codes 2154 and 2155 are not filled in.

Net payment of 767.52 euros (1000 – 16 – 216.48) is made to Juhani´s bank account.