Taxation of the salary and wages of foreigners in Estonia

NEW! Since 1 January 2021, a non-resident employer who leases or mediates temporary agency workers to the Estonian user undertaking to work in Estonia is required to register himself in the Estonian Tax and Customs Board and to withhold and declare all labour taxes from the salary of a non-resident temporary agency worker since the day when this temporary agency worker began his/her work in Estonia. If there is a certificate A1/E101 of the other Member State, the non-resident employer and non-resident temporary agency worker are not required to pay social tax and social security contributions in Estonia.

The amendments are published in the State Gazette on 10 July 2020.

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.

If there is no social tax liability in Estonia, you have to pay social security contributions abroad according to the rules of the respective country!

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.

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.

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.

Abbreviation in the figures
  • A1/E101 – the certificate concerning the social security legislation applicable to the holder of the certificate

Figure 1. 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)

Taxation of the salary and wages of non-residents

Figure 2. 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

Taxation of the salary and wages of resident employees and non-resident employees

The terms “temporary agency work” and “user undertaking” are explained in the Employment Contracts Act (§ 6 (5)) and the guidance documents of the Labour Inspectorate. The Income Tax Act does not give any special meaning to these terms in tax law.

30.10.2020