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In Estonia, employment relations are regulated by the Employment Contracts Act (ECA). Available online on the Web page of Riigi Teataja (State Gazette).

The purpose of the Act is to regulate the relations between employers and employees, ensuring that based on the principle of a welfare state all employees have sufficient security, allowing undertakings realisation of their constitutional right to conduct a business and contributing to the growth of the competitiveness of Estonian economy.


Working conditions

An employer must ensure that the following working conditions apply to workers from the Third countries

An employer must ensure that the following working conditions apply to posted workers in Estonia:

Important! Exception: The working conditions effective in Estonia are not applied in the case of an up to eight-day posting if the posted worker is a skilled worker whose duty is the initial assembly or first installation of goods necessary for taking the goods ordered into use, if such work is an integral part of a subscription contract. The derogation does not apply if the work done by the posted worker is connected with construction work involving the construction, renovation, maintenance, alteration or demolition of buildings, including excavation work, earthmoving work, actual construction work, or the assembly and demolition, connection and installation, modification, renovation, repair, disassembly, demolition, maintenance, painting, cleaning or repair of prefabricated components. The periods of time worked by another employee posted to Estonia by the same employer for the performance of the same work in the year leading up to the commencement of the posting are taken into consideration in the calculation of the up to eight-day posting period.

In the application of annual holiday, compensation paid in cash in connection with the posting is considered to be part of wages, unless it is paid to cover travel, accommodation or meal expenditures incurred during the course of the posting.

Important! Exception: The working conditions effective in Estonia are not applied in the case of an up to eight-day posting if the posted worker is a skilled worker whose duty is the initial assembly or first installation of goods necessary for taking the goods ordered into use, if such work is an integral part of a subscription contract. The derogation does not apply if the work done by the posted worker is connected with construction work involving the construction, renovation, maintenance, alteration or demolition of buildings, including excavation work, earthmoving work, actual construction work, or the assembly and demolition, connection and installation, modification, renovation, repair, disassembly, demolition, maintenance, painting, cleaning or repair of prefabricated components. The periods of time worked by another employee posted to Estonia by the same employer for the performance of the same work in the year leading up to the commencement of the posting are taken into consideration in the calculation of the up to eight-day posting period.


Taxes

Employee

If tax liability is created in Estonia (i.e. the person lacks a valid social security certificate in their home country or they spend at least 183 days in Estonia), the employee must apply for an Estonian personal identification code to be registered in the employment register.

For more information, see the instructions on the registration of employees on the website of the Tax and Customs Board.

Employer

The following information is based on the assumption of no permanent establishment. Short-term (up to 183 days within 12 months) employment in Estonia:

  • no income tax liability arises in Estonia, hence there is no obligation of deducting income tax from remuneration;
  • employment must only be registered only if the following tax liability arises in Estonia:
  • payment of social tax and unemployment insurance premiums and deduction of the employee’s unemployment insurance premium, except if the employee has been issued an A1 or E101 social insurance certificate (EEC member state, Switzerland) or a similar certificate (any country that is a party to an agreement on social security: Ukraine, Canada, Australia) that precludes the creation of social insurance tax liability on the remuneration in Estonia, thus also precluding a registration obligation;
  • fulfilling the employer’s tax liabilities listed above requires the prior registration of the non-resident employer with the Tax and Customs Board (in addition to the registration of employment).

If no tax liability arises in Estonia (a social insurance certificate has been issued in the home country), no registration obligation will arise.

Long-term (at least 183 days within 12 months) employment in Estonia:

  • fulfilling the employer’s tax liabilities requires the registration of the non-resident employer with the Tax and Customs Board;
  • employment must be registered in the employment registry;
  • an e-Tax Board agreement is signed;
  • employer declares wages to Estonian Tax and Customs Board;
  • income tax liability is created on employees’ remuneration; the employer deducts income tax;
  • employer pays social tax and unemployment insurance premiums and deducts the employee’s unemployment insurance premium, except if the employee has been issued an A1 or E101 social insurance certificate (EEC member state, Switzerland) or a similar certificate (any country that is a party to an agreement on social security: Ukraine, Canada, Australia).

For more information, see the instructions on tax liability of non-resident employers on the website of the Tax and Customs Board.