What is the change?
Until 2021, no income tax was paid on the wages of rented foreign employees in Estonia if they stayed here for less than 183 days in 12 consecutive months due to the fact that a foreign enterprise that provided the employee for rent was considered the employer. Thus, there was no employer in Estonia and, in accordance with the tax treaty, taxes on wages were paid in another country – at the location of the leasing company. As a rule, this model has been used for employees from third countries hired through EU resident companies for up to 6 months.
Since 1 January 2021, a company renting foreign employees will be considered an employer in Estonia, and non-resident employers or temporary employment agencies that rent labour force to Estonian users in order to perform work in Estonia will have to:
- register with the Tax and Customs Board as a non-resident employer;
- register employees in the employment register;
- withhold and pay income tax on the wages of non-resident employees since the first day of their employment in Estonia.
The presence of a certificate A1/E101 of another EU member state exempts the non-resident employer and the rented employee from paying social tax in Estonia.
What should be done?
Analyse the current situation and assess the liabilities arising from the changes that have come into force.
If necessary, complete the required registration steps either yourself or with the help of local qualified specialists.
How can we help?
- We can advice and, if necessary:
- Register your company as a non-resident employer
- Register employees in the employment register
- Provide payroll services
- Submit tax returns
This publication is for general information purposes only and does not constitute professional advice. It should not be applied without obtaining independent advice based on specific facts. We are not responsible for any damage incurred as a result of applying the provisions of this manual.