Changes in law 2022

Minimum wage

From January 1, 2022, the minimum wage will rise to 654 EUR per month (in 2020 and 2021 it was 584 EUR). The minimum hourly wage rate is 3.86 EUR gross.

Social tax minimum

The minimum social tax in 2022 is EUR 192.72, i.e. the same as in 2021. The reason is that the minimum wage remained unchanged in 2020 – 2021. The amount of 192.72 EUR 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 2022. 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, the employee must pay 33% of social tax and a 0.8% unemployment insurance premium (except in the case of a Board Member’s contract).

Reducing the VAT rate for press publications

The VAT Act is amended, establishing the rate of VAT on press publications at 5% instead of 9% as it has been so far. The purpose of the change is to support the availability of quality Estonian journalism in the information war environment that is part of the war in Ukraine.

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 is also valid in 2022.

The principles of the calculation of the probationary period changed

From August 1, 2022, the time that an employee's performance of duties is prevented, either due to temporary incapacity for work or use of vacation, is not included in the probationary period. There may also be other reasons that prevent the employer from assessing the employee's suitability for the job. The probationary period is extended proportionally – for example, if the employee was on sick leave for 10 days, the probationary period is extended by 10 days. Employers must keep in mind that a new probationary period is not applied when a fixed- term employment contract is extended or concluded consecutively to perform similar work.

Payment of tax liabilities in instalments and the second pillar of funded pension

From July 1, 2022, the tax arrears of the second pillar can no longer be deferred (paid in instalments). All other tax debts can be deferred as earlier, but the prerequisite is that the tax arrears of the second pillar of funded pension are paid.

The Estonian Tax and Customs Board interest rate

Until the end of 2021, the Tax and Customs Board applied the reduced discount: the 0.06% daily interest rate was reduced by half, i.e. to 0.03%. From January 1, 2022, it is restored to 0.06% per day.

VAT reduction on bad debts

From January 1, 2022 it is possible to reduce VAT on bad debts if the following conditions are met:

  • an invoice has been issued for the goods transferred or the service provided in accordance with § 37 of the Value Added Tax Act;
  • the VAT amount is calculated from the transaction and reflected on the VAT return for the taxation period of the transaction;
  • the debt has not been transferred;
  • at least 12 months, but no more than three years, have passed since the invoice payment due date, except in the case specified in point 6;
  • the debt has been written off in the accounts because the taxpayer has not succeeded in collecting the debt despite all their efforts to do everything possible to collect the debt, or the expenses incurred for collecting the debt exceed the estimated income from its collection (that is, the debt has been removed from the balance sheet);
  • in case of a debt containing more than EUR 30,000 VAT, the debt is proven by an effective court decision;
  • the purchaser of the goods or the recipient of the service is not a related person within the meaning of the Income Tax Act;
  • the taxpayer has informed the purchaser of the goods or the recipient of the service in writing about the write-off of the debt in the accounts in the month of its write-off, specifying the VAT amount related to the written-off debt.

If all these conditions are met, the seller can reduce their VAT liability to the extent of the unpaid amount during the tax action period when the debt is written off in the accounts (removed from the balance sheet).

In the case it is not possible to forward the notification about the write-off of the debt to the debtor, because, for example, the body has been liquidated and there are no contact details to whom and where to send the notification, but all other conditions are met, the taxpayer still has the right to use the opportunity to reduce their tax obligation.

If the conditions are met and the tax obligation is reduced due to bad debt, but the debt that was the basis of the reduction is later paid in part or in full, then the paid debt or part of it is included in the amount of taxable value in the taxation period, when the debt was paid in part or in full.

A buyer subject to VAT who has partially or fully failed to pay for goods or services due to insolvency must bear in mind that if they have partially or fully deducted the VAT included in the unpaid invoice as input tax and have received a notification from the seller about the write-off of the debt in the accounts, they are obliged to increase their tax obligation (reduce the deductible input tax) by the amount of VAT in the taxation period they received the notification. If a bad debt is written off in the accounts, a credit invoice is not sent to the debtor.

If the VAT liability is reduced on the basis of § 2911 of the VAT Act, and during the taxation period the invoices related to the relevant transaction partner must be reflected in the VAT return annex KMD INF, the seller must also declare on KMD INF Part A and the buyer on Part B, either for the first time or again (if the corresponding invoice was declared on KMD INF during the taxation period of the arising of turnover) the partially or fully unpaid invoice, to which the related bad debt was written off in the accounts. In both cases, the usual details of the invoice (invoice date, number, details of the transaction partner) are declared as well as numerical data of the unpaid part of the invoice with a minus.

Collector coins are taxed

From July 1, 2022, the principles of taxation of collector coins are brought into line with the VAT Directive. According to the VAT Directive, the VAT exemption cannot be applied to coins that are not normally used as legal means of payment or that have a numismatic value, i.e. collector coins.

Amendment of the special arrangements for imposing value added tax on the resale of second-hand goods

In accordance with § 41 subsection 3 of the Value Added Tax Act, in the case of the resale of second-hand goods, original works of art, collectors’ items or antiques, the <0>taxable value of supply shall be the difference between the sales price and purchase price of the goods, which means that, when using the special scheme, the taxable value must be determined on a transaction basis, on the basis of the difference between the sale and purchase price of each individual item.

The Ministry of Finance consulted with the VAT Committee in the second half of 2021. As a result of the consultation, paragraph 3 of § 41 of the VAT Act is amended in such a way that the possibility is added to the implementer of the special scheme with the consent of the tax authority, to calculate the taxable value to be declared for the resale of used goods on the basis of the difference between the total sale and purchase prices of the resold and acquired second-hand goods, which are subject to a special scheme, during the entire taxation period. Therefore, from January 1, 2022, with the consent of the tax authority, the taxable person applying the special scheme does not have to determine the taxable value of each resold item separately but calculates the taxable value based on the purchase and sale transactions of the entire taxation period in total. Such a calculation of the taxable value is justified in cases where the standard calculation is too complex.

Transport service for the export and import of goods

From July 1, 2022, the transport service provided for the export and import of goods, and the services related to such transport, may be taxed at a 0% VAT rate only if the service is provided directly to the sender or recipient of the goods.

Pay-outs from the second pillar of funded pension are further simplified

Previously, you could only withdraw all your funds at once or choose between a lifetime or fixed-term pension, now you can also withdraw a desired amount. Persons of the retirement age who collect money in a pension fund or use a pension investment account, have the right to this. The amendment to the law enters into force on January 1, 2022.

Third pillar of funded pension

From January 1, 2022, it is possible to choose a fund pension for the third pillar as well. This makes it convenient to withdraw money from the third pillar funds in parts. Everyone can choose the period and frequency of the pay- outs. The payments during a payment period of at least equal to the remaining years on average are exempt from income tax.

Tax exemption for goods and services in response to the COVID-19 pandemic

An amendment to the VAT Directive, which will enter into force on January 1, 2022, is adopted, establishing the right of the European Commission and the agencies and institutions established under the EU law to purchase goods and services at a 0% VAT rate and import goods tax-free in order to respond to the COVID-19 pandemic. Such a tax exemption applies if these goods are purchased for the free distribution or the free provision of services. The VAT exemption applies retroactively from January 1, 2021.

Temporary employment during the period of registration as unemployed

Temporary employment during the period of registration as unemployed, i.e. a workbit, means an employment period overlapping the period of registration as unemployed. From September 1, 2020, it is possible for people registered as unemployed to be temporarily employed while looking for a full-time job without terminating their registration as unemployed due to this employment. This allows jobseekers to be professionally active until they find a new full-time job. Since the maximum permitted gross salary is related to the minimum wage it will rise to 261.60 euros in 2022 (40% of the minimum wage). Please see the detailed conditions here: Amendments to the law in 2020.

Data from e-Business Register free of charge

From October 1, 2022, all data about companies can be viewed and downloaded in the e-Business Register free of charge. Previously, you had to pay a service fee to see the company's owners, annual reports, articles of association, etc., but no more.

Changes in the Family Benefits Acts

On April 1, 2022, changes in the parental benefit and child leave system, which are intended to make the lives of families with children easier and more flexible, will enter into force.

You can read the details on the website of the Social Insurance Board:

Changes in the list of transport services of goods taxed at 0% VAT rate

The changes stipulate that the following services will be taxed at a VAT rate of 0% only, if the service is provided directly to the consignor or consignee:

  • transport service for delivering goods outside the customs territory of the European Union or to a non-EU country, that is part of the EU customs territory;
  • transport service for importing goods;
  • transport service for the delivery of non-EU goods to the customs territory of the EU, if the goods are routed to customs warehousing, free zone, inward processing, transit or to the customs procedure of temporary importation with full exemption from import custom tax, or are temporarily stored;
  • services for organising the transport of goods mentioned in the previous points and ancillary services related to such transport.

According to the changed Value Added Tax Act, from July 1, 2022, a 20% VAT tax is applied on transport services for the export and import of goods if the service is not provided directly to the consignor or consignee.