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 wageTax-exept sum per monthIncome tax per monthAvailable profit per monthMonthly winAnnual winWin %
45550004556072215
47550004756477016
50050005006983016
540460165246173413
580420325485363811
62038048572455429
66034064596374467
70030080620293505
74026096644212543
780220112668131582
8201801286925621
846154138708000
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.