The income of a private person is taxed on general grounds irrespective of age.
As for children’s summer employment, an employer has to indicate the information on a child’s earned income on Annex 1 of Form TSD, even if the income is lower than the basic exemption amount for a calendar month, which is 500 euros in Estonia.
Application for basic exemption
To be sure that the basic exemption is taken into account in the taxation of a child’s income during the tax year, it is necessary to submit an application for basic exemption.
If the child’s income is less than 500 euros per calendar month and the application for basic exemption is submitted to the child’s employer, income tax will not be withheld from the child’s earnings.
If the application for basic exemption is not submitted, the child’s employer will withhold income tax from the child’s wages in full, and the basic exemption will be taken into account when the child files an income tax return. The amount of tax overpaid will be refunded on the basis of the income tax return.
Filing an income tax return
If a child holds a certificate for giving a digital signature, he or she can file an income tax return via e-service of the Estonian Tax and Customs Board or Internet bank.
If a child does not have a certificate for giving a digital signature, an income tax return must be submitted on paper and it must be signed by his/her parent.
One parent or other person maintaining children who provides maintenance for two or more children may deduct the increased basic exemption of 1848 euros from his or her income, starting with the second child.
If a child has earned wages or received any other taxable income, the parent has to declare the child’s income on his or her income tax return and the parent’s increased basic exemption will decrease accordingly, by the amount of the child’s income.
A child has earned 1000 euros in summer.
A parent with two or more dependent children may deduct the amount of increased basic exemption – 1848 euros – from his or her income. But in this situation, due to the child’s summer earnings, the parent’s increased basic income is reduced by the amount of the child’s income resulting in 848 euros (1848 – 1000 = 848).
Based on the information submitted by the child’s employer to the tax authority, the child’s personal data and income are already pre-completed on the parent’s income tax return. If a child has earned income which is not indicated on his/her parent’s income tax return, the relevant data must be added by the parent.