Changes in law 2021

Minimum wage

From January 1, 2021, the minimum wage will not increase and remains at 584 EUR per month, as in 2020. As a result, the rate of the minimum hourly wage also remains unchanged: 3.48 EUR gross.

Social tax minimum

The minimum social tax in 2021 is 192.72 EUR. This is the amount that must be paid monthly for an employee with an employment contract. In the case of other types of contracts, it is the minimum amount that must be paid in order for the employee to have valid health insurance.

Payroll taxes

There will be no changes in payroll taxes in 2021. The taxes to be withheld are still 1.6% for the employee's unemployment insurance premium (except in the case of Board Member's contract), 2% for funded pension (if the person has joined), and 20% as income tax. In addition, an employee must pay 33% of social tax and 0.8% as an unemployment insurance premium (except in the case of a Board Member’s contract).

Amendments to the Funded Pensions Act

With the adoption of the pension reform, people can now decide, whether they want to stay in the second pillar of the funded pension and continue to make contributions there or withdraw from it. As an additional possibility, there is an option to allow the money collected to grow in the second pillar but to stop making new contributions. As a new option, within the second pillar, you can start investing your own pension money by having it transferred to your pension investment account.

All these new possibilities are voluntary and require the submission of a corresponding application by the person in question. The realisation of the application depends on the time of its submission:

  • applications submitted from January 1, 2021 to March 31, 2021 suspend the obligation of the 2% payment from September 1, 2021;
  • applications submitted from April 1, 2021 to July 31, 2021 suspend the obligation of the 2% payment from January 1, 2022;
  • applications submitted from August 1, 2021 to November 30, 2021 suspend the obligation of the 2% payment from May 1, 2022;
  • applications submitted from December 1, 2021 to March 31, 2022 suspend the obligation of the 2% payment from September 1, 2022.

Thus, the obligation to withhold funded pension payments may be changed three times a year: on January 1, May 1, and September 1. This is regardless of the reason, whether a person leaves to, stops contributions to, retires from, or joins the second pillar of funded pension. Person-specific information about the obligation to withhold the payment can be obtained from Pensionikeskus:

However, it must be noted that a 20% income tax must be paid when withdrawing money from the pension fund before the age of retirement. When withdrawing money at the age of retirement or five years before reaching it, the income tax to be paid is 10%. You can withdraw money from the second pillar at retirement age or up to five years before reaching it tax-free by withdrawing the money as a lifetime pension or a fixed-term pension taking into account the longevity risk. Payments made to persons with no work ability are also tax-free.

As of next year, the pay-outs from the second pillar are not taken into account when calculating tax-free income and, therefore, do not reduce a person’s amount of tax-free income.

Benefits for incapacity for work from January 1, 2021 to December 31, 2022

To reduce the risk associated with people going to work when ill, as well as to reduce an employees’ deductibles, and thereby limit the spread of COVID-19, the scheme for reimbursing sick leaves was temporarily changed as of January 1, 2021. The employee’s deductible applies to the first day of illness, the employer pays the benefit from the second to the fifth day of illness, and the EHIF pays the benefit from the sixth day of illness. This compensation scheme continues in 2022.

The 4% contributions to the second pillar restored

On August 31, 2021 the temporary suspension of contributions to the second pillar, which was valid from July 1, 2020 to August 31, 2021, ends for those who submitted the relevant application.

The retirement age of the third pillar changes

From now on, new entrants to the third pillar of funded pension can retire up to five years before the state’s retirement age. Current third pillar contributors retain the option to retire with it at the age of 55. Money can be withdrawn from the third pillar earlier, but then 20% income tax must be paid on it.

Removal of VAT exemption on postal parcels

From July 1st, the VAT exemption on the import of packages with a value up to EUR 22 will end, and 20% VAT will be added to less-costly packages from third countries. In order to simplify the import VAT settlement of low-value consignments, a special scheme for the distance selling of goods imported from a non-EU country (IOSS special scheme) is established.

The procedure for distance selling within the EU changes (IOSS / OSS special schemes)

From July 1, a general distance selling limit of EUR 10,000 is established. Up to this threshold, the transaction is taxed with VAT in the seller’s Member State, and beyond this threshold in the buyer’s Member State or the buyers’ Member States. Sales to all EU countries are counted together, not for each Member State separately.

This special scheme applies only to private buyers. The VAT logic for the sale of goods to companies remains the same: if it is a VAT-registered body in another EU Member State, then a 0% reverse charge can be used, and if the customer does not have a valid VAT number, the Estonian VAT of 20% must be added.


The IOSS special scheme applies to the consignments of goods imported to the final consumer located in the EU if the goods at the time of the conclusion of the sales contract are located in a non-Community country, the actual value of goods does not exceed 150 euros, and the goods are not subject to excise duty. The actual value consists of the price of the goods sold for export to the territory of the EU without transport and insurance costs (unless these costs are included in the price and are not indicated separately on the invoice to the buyer) and any other taxes and fees that customs can determine with the help of relevant documents.

The IOSS special scheme allows the seller to add the VAT payable upon importation to the sale price of the goods at the time of the sales transaction and, therefore, the buyer generally does not have an additional tax liability when receiving the goods.

The IOSS special scheme simplifies the VAT settlement – a company that has joined the special scheme can register itself as a user of the special scheme, and declare and pay VAT on the import of all goods covered by the special scheme in one Member State (the Member State of registration) instead of paying VAT at the time of importation in each Member State where the goods are imported.

In conclusion, a company from a non-Community country using the IOSS special scheme should declare and pay VAT on goods imported by end consumers located in the EU, as follows:

  • a company from a non-EU country (e-store) chooses an intermediary in one of the EU countries, who will submit IOSS turnover declarations that include the turnover of goods sold to all consumers in the Member States;
  • the e-store transmits to the intermediary the information about the VAT paid by the buyers at the time of the sale of the goods;
  • based on the data received from the e-store, the intermediary prepares the VAT declaration for the distance selling of the imported goods (IOSS VAT declaration) by the end of the month, following the month in which the turnover occurs, and submits this declaration and pays the VAT to the tax authority of its country of registration (the intermediary registered in Estonia to the Estonian tax authority) by the deadline for submitting the declaration.

The IOSS special producer’s taxation period is a calendar month, and the IOSS declaration is submitted monthly by the last day of the following month.


OSS (One Stop Shop), i.e. a special scheme for VAT taxation in intra-community distance selling and the transfer of goods through an internet-based trading place.

From July 1, 2021, the existing “Mini One Stop Shop”, MOSS system, which could previously only be used for the taxation of digital services provided to end consumers in other Member States, was expanded. It became the “One Stop Shop” (OSS), which is applied to intra-community distance selling and, in addition to digital services, also to other services provided to end consumers in other Member States, the turnover of which is generated in the end consumer’s Member State.

The application of the special scheme makes it easier for the company to fulfill their VAT obligation arising in another Member State. The company, who has chosen to apply the special scheme, declares the turnover arising in another Member State (the e-store owner in certain cases also the turnover arising in Estonia) and pays the VAT to the Estonian tax authority.

This special scheme can also be used by a company located outside the EU that does not have a permanent establishment in any EU Member State when selling goods located in Estonia to an end consumer through an e-store

The taxation period of the OSS special scheme is a quarter, and the OSS declaration is submitted by the last date of the month following each quarter:

  • 1st quarter - April 30
  • 2nd quarter - July 31
  • 3rd quarter - October 31
  • 4th quarter - January 31 of the following year

NB! Please note that the UK is no longer a Member State of the EU, and therefore the special scheme does not apply to private buyers from the UK. In the UK, the VAT obligation arises from the first sale, additional information can be found at:, for everyone who sells their goods through the Amazon UK platform, it is much easier as Amazon handles the collection and payment of the tax.

The Estonian Tax and Customs Board interest rate

Until the end of 2021, the Tax and Customs Board applies reduced interest: the current 0.06% daily interest rate is reduced by half, i.e. it is 0.03%. The Tax and Customs Board has the right to reduce the interest on deferred tax arrears by up to 100% i.e. to a 0% interest rate.

Personal protective equipment

COVID-19 was added as a biological hazard to the regulation “Occupational health and safety requirements for the work environment affected by biological hazards”, meaning that expenses incurred from it are tax-free.

Variable hours agreement in retail trade

From December 15, 2021, an employer operating in the retail sector (EMTAK code G 47) has the opportunity to enter into variable hours agreements with their employees. Employees working in the retail sector may work additional hours of up to eight hours per seven-day period in addition to their normal part-time hours under a written variable hours agreement. The variable hours agreement gives both the employee and the employer a more flexible way to plan work. Such agreements can be concluded until June 14, 2024.

Normal working hours and variable hours must not exceed full working hours. Variable hours can be agreed upon both in the employment contract and in its appendix. It is important that the agreement is in writing and signed.

Only the employee can be the initiator of the conclusion of a variable hours agreement, by expressing their wish to the employer in writing. The conclusion of a variable hours agreement is voluntary. The employer cannot oblige an employee to enter into a variable hours agreement or to work on the basis of variable hours. All variable hours the employer can offer in the framework of the variable hours agreement are voluntary and must be separately agreed upon in writing at least 24 hours in advance.

Tax Information Exchange Act

Information on cross-border tax schemes must be submitted to the tax authority. According to the Directive on the Exchange of Information on Tax Schemes (DAC6), tax advisers must inform tax authorities about cross-border schemes that enable aggressive tax planning, conceal the beneficial owner of assets or make it difficult to exchange information about bank accounts. Schemes must be reported by persons who have developed them as part of their business activities or participated in their development – both the entrepreneurs themselves, as well as tax advisors and lawyers.