Registration of a non-resident operating in Estonia as an employer
For registration a non-resident operating in Estonia as an employer has to contact or go to one of the service offices of the Estonian Tax and Customs Board:
Service Bureau in Tallinn
Estonian Tax and Customs Board
Lõõtsa Street 8a, 15176 Tallinn
phone +372 880 0812
In order to be registered, an application on form R2 setting out the following shall be submitted:
- the name of the non-resident employer
- the postal address of the employer in the home country, if any
- the postal address of the employer in Estonia, if any
- the name and postal address of the person representing the employer
- the signature of the employer or a person authorised by the employer
The following documents shall be attached to the application:
- a copy of the articles of association or another document regulating the activities of the non-resident employer if available
- a document certifying the authorisation of the person representing the employer
- a specimen signature of the person which is notarised or officially certified by a tax authority
- in case of tax representative, a written agreement between the non-resident and his tax representative
In case of termination of activities in Estonia, the non-resident employer has to submit form R4 within five working days.
Taxation of the income of employees shall generally be performed by withholding income tax. Non-resident employers, which are not subject to the registration requirement arising from the Estonian Taxation Act or other Estonian legal acts, are registered in the register of taxable persons as employers in order to be able to fulfil tax obligations. A withholding agent for income tax is a non-resident with a permanent establishment or operating as an employer in Estonia, who makes payments subject to income tax to a natural person or non-resident.
A non-resident who operates as an employer in Estonia but does not have a permanent establishment in Estonia is required to withhold income tax only on salaries, wages and other remuneration subject to income tax paid to a resident natural person or to a non-resident, and remuneration paid to resident and non-resident members of the management and controlling bodies of a legal person, taking into account the deductions allowed to residents under the Estonian Income Tax Act.
Income tax on fringe benefits granted to a natural person is paid by employers who are non-residents having a permanent establishment or operating as employers in Estonia who grant taxable fringe benefits.
A withholding agent is required to submit a tax return on form TSD with annexes 1 or 2 to the service bureau of the Estonian Tax and Customs Board by the 10th day of the month following the month during which the payment was made and is required to transfer withheld income tax to a bank account of the Estonian Tax and Customs Board (income accounts of the Estonian Tax and Customs Board).
Employers pay income and social tax on granted fringe benefits in full. A person who grants taxable fringe benefits is required to submit a tax return on form TSD with annex 4 to a regional tax and customs centre of the Tax and Customs Board by the 10th day of the calendar month following the period of taxation.
The social tax is paid at a rate of 33% on all payments made to employees for salaried work performed. Employers pay the social tax in full. Pursuant to the Estonian Social Tax Act, social tax shall be paid on wages and other remuneration paid to employees, on remuneration paid to members of management and controlling bodies of legal persons, on fringe benefits and on income tax calculated on fringe benefits.
An unemployment insurance premium to be withheld is 1,6% of the gross salary of an employee. A rate of a funded pension payment is 2% of the gross salary of a resident employee.
Pensioners are not entitled to unemployment status benefits and therefore they do not pay the unemployment insurance premium. In addition to this, employers pay the unemployment insurance premium at a rate of 0,8% of the sum of gross salaries monthly.