The Estonian economy is a tempting target for international companies planning to expand their operations – with the bonus that the country’s membership in the European Union widens the horizon of opportunities even further.
These opportunities come with challenges – and payroll management is one of the trickiest. Whether your company is planning to move staff abroad or hire employees in the new territory, you cannot afford to tumble over barriers in Estonia’s payroll and income tax landscape – it will cost you time and money.
Foreign companies have the option of opening a legal entity in Estonia, with the most popular choice being a private limited company, known as an osaühing, or OÜ and operating under the Commercial Code. It is the favoured choice both for Estonian residents and e-Residents; an ID that is issued by the government and is available worldwide for individuals to start and run their business wherever their location.
Taking this step before running payroll in Estonia requires detailed practical knowledge of the company, tax, and employment law, and staying up to date with taxation rates.
However, there is an alternative and simpler route. Bradford Jacobs’ will navigate around these potential pitfalls effectively and efficiently.
Outsourcing payroll in Estonia will streamline your operations by dealing with the following:
- All employees – Estonian, European Union (EU), European Economic Area (EEA) and non-EU and non-EEA – must be registered in the Employment Register and with the Estonian Tax and Customs Board.
- Registration is through the e-Tax Board or at a Tax and Customs Board Office.
- The Employment Register is used for providing information to the Health and Insurance Fund, the Police and Border Guard Board and the Social Insurance Board.
- To register, employees must have an Estonian ID card before starting work; if registering temporarily using their date of birth, they must have an ID card within five days.
- Employees must be registered at the latest when they start work.
- Information for the Employment Register must include Employee’s ID details; employer’s details and registry code; date of starting work and, if relevant, end date.
- Register employees with the Tax and Customs Board. Employers supply non-tax resident data on TSD Annex 2, and for tax residents on TSD Annex 1.
- Individuals change tax residency by submitting Form R.
- Employees are automatically registered for the Health Insurance Fund and the Social Insurance Board once they have been entered into the Employment Register.
- Employees from EU/EEA nations will be exempt from social insurance contributions if they produce an A1 Certificate from their home country’s social insurance organisation.
