CHANGES IN INCOME TAX LAW


In 2018 new amendment to the Income Tax Act will come into force in Estonia. Some specifics still need to be overlooked and clarified, but some of the changes in the law are already known and the government has started preparations for smooth transition. Changes in the Act are mostly good news especially for working and middle class, also to small company owners. For the accountants, it is going to be quite a nightmare.

The biggest and also the most important change is going to be the raise of tax – except amount from 170 € to 500 €. These changes are graduated and tax-except amount is raised bit by bit every year: Though, income tax will still be 20% as it is now. Next table gives a simple overview of how much more money will employee get monthly and annually due to 500 € tax-except.

Gross wage Tax-exept sum per month Income tax per month Available profit per month Monthly win Annual win Win %
455 500 0 455 60 722 15
475 500 0 475 64 770 16
500 500 0 500 69 830 16
540 460 16 524 61 734 13
580 420 32 548 53 638 11
620 380 48 572 45 542 9
660 340 64 596 37 446 7
700 300 80 620 29 350 5
740 260 96 644 21 254 3
780 220 112 668 13 158 2
820 180 128 692 5 62 1
846 154 138 708 0 0 0

Great number of working class will gain from this new amendment to the Income Tax Act. This is also good news for employers, because they have to pay less tax from each employee. This surplus can be used to pay extra for sick days or compensate employee fitness club checks and participation fees at sport events. For accountants, changes in the Act will not be easy at least for first couple of years. There will be some difficulties calculating income and taxes if employee has two jobs or if salary varies monthly.

Also, initially planned 14% accomodation service turnover tax will not come into force and will stay on 9%.

A new thing will be a bank fee (similar to state fee) for financial institutions. It will be 0,04%- 0,4% from the volume of institution assets.