Payroll in Estonia 2026: 22% | 33% Rates & TSD Deadlines

Payroll in Estonia for a foreign company in 2026 works like this: the employer records the employee in the employment register no later than the start of work, withholds 22% income tax, the 1.6% unemployment insurance premium and the 2–6% funded pension contribution, and pays 33% social tax plus 0.8% employer unemployment insurance on top. The TSD return is filed and the taxes are paid by the 10th of the month after the salary is paid (Estonian Tax and Customs Board, EMTA). An employee on €3,000 gross costs the employer €4,014 a month. From 1 October 2026, TSD moves to data-based filing straight from accounting software. Below: when you must register as an employer, the 2026 rates, deadlines, own OÜ vs EOR vs non-resident employer, a worked cost example and a 2027 plan.

Hiring in Estonia in Q4? A partner from our Estonia practice reviews your hiring set-up in 30–45 minutes, costs out each role and sends a written summary with next steps. Book the $99 strategy session, credited to the project → · Payroll services in Estonia

When a foreign company must register as an employer in Estonia

When the employee works in Estonia and the employer is foreign, EMTA requires the company to register as a non-resident employer. A company not entered in the Estonian commercial register completes this registration with EMTA before starting activities.

A non-resident employer's obligations, per EMTA:

• enter employees in the employment register (TÖR) no later than the moment they start work;
• withhold income tax, the employee unemployment insurance premium and the mandatory funded pension contribution;
• calculate social tax and the employer unemployment insurance premium;
• tax fringe benefits: in Estonia only the employer pays income and social tax on them;
• transfer the taxes to EMTA by the 10th of the following month, quoting the personal reference number;
• file TSD with Annex 1 (Estonian-resident employees) or Annex 2 (non-residents), and Annex 4 for fringe benefits.

Two questions we check before the hire. First, for an employee working remotely from another country, the Estonian Social Insurance Board or the competent authority of another EEA state decides where social security is paid, evidenced by an A1 certificate. Second, whether the employee creates a permanent establishment of your company in Estonia. That drives corporate tax.

Estonian payroll tax rates for 2026

EMTA publishes the 2026 rates on its Tax rates page. They are the same for a resident company and a non-resident employer.

The key 2026 change: the basic exemption no longer depends on income. Every employee who applies gets €700 a month at any salary level. In 2025 it was up to €654 and shrank as income rose.

TSD return deadlines and the 1 October 2026 change

TSD is filed by the 10th of the month following the month of payment, and the taxes must reach EMTA's account by the same date. Estonia taxes payroll on a cash basis: the payment date sets the tax month.

In practice:

• September salary paid on 30 September goes into the TSD due 10 October;
• the same salary paid on 1 October goes into the TSD due 10 November;
• December salary paid in January is taxed at the new year's rates (EMTA's example: January TSD due 10 February);
• EMTA advises checking each employee's pension rate (2/4/6%) in December, April and August, because the withholding obligation can change on 1 January, 1 May and 1 September.

From 1 October 2026 TSD becomes data-based. Accounting software sends salary payment data to e-MTA over a machine-to-machine interface, EMTA builds the return and the accountant approves it. Annexes 1 and 2 are replaced by a single payments view covering residents and non-residents, and file uploads move to the XBRL GL format; the previous XML format stops being valid. e-MTA keeps accepting the current CSV file as a transitional solution until the end of 2027. Before the next TSD deadline, check whether your accounting software supports the new interface.

Own OÜ vs EOR vs non-resident employer

There are three ways to employ someone in Estonia. The choice decides who the employer is for EMTA, who files TSD and how fast you start.

In our experience EOR suits the first hire. Your own OÜ usually wins once the Estonian team grows or EU revenue appears. The answer depends on your model; incorporation and bank timelines depend on the bank and its checks.

Worked example: employer cost of an employee in Estonia

Employer cost equals gross salary × 1.338 (33% social tax plus 0.8% unemployment insurance). Net pay equals gross minus 1.6% and the pension contribution, minus 22% income tax on the amount left after those contributions and the basic exemption. The employee's unemployment premium and pension contribution are deducted from taxable income (EMTA; Estonian Ministry of Finance).

Estonian-resident employee who applied for the basic exemption, 2% pension rate, 2026:

For an employee who is not tax-resident in Estonia the basic exemption follows separate rules, which EMTA describes separately for residents and non-residents. We calculate those cases per employee.

Planning for 2027 and Q4 hiring

As of 28.09.2026 EMTA's rates page covers 2024–2026 and has no 2027 rates yet. Build the 2027 model on 2026 rates and re-check in December.

Five points for the autumn hiring plan:

1. Payment date. December salary paid in January is taxed at 2027 rates.
2. Minimum wage. In 2026 it rose on 1 April, to €946. Leave room for a mid-year revision.
3. Pension rates. Employees may have changed their rate; the withholding obligation changes on 1 January.
4. Accounting software. From 1 October 2026 TSD is filed as data. If your software cannot send the data, enter it manually in the new e-MTA view or upload an XBRL GL file; CSV is accepted until the end of 2027.
5. Registration by the start of work. The TÖR entry is due no later than the moment the employee starts work.

FAQ

Payroll services in Estonia, end to end

INNOVA's Estonia practice has been partner-led since 2017. We register your OÜ or non-resident employer status, record staff in TÖR, run payroll and TSD, bookkeeping and banking. Payroll in Estonia starts from US$600 a month depending on turnover and transaction volume; the exact fee comes in writing after a 30-minute call.

Why clients work with us:

• 14 years of practice since 2012, 50+ jurisdictions, direct teams and vetted local specialists under one accountable partner;
• the Estonia practice has been partner-led since 2017;
• one named partner for the whole cycle: formation, banking, tax, payroll;
• partner reply within 24 hours, fixed price after scoping, only government fees on top;
• our own group companies: INNOVA CG LTD (England and Wales, No. 17390819) and INNOVA CONSULT LTD. (Canada, 1522612-1).

Payroll in Estonia → · $99 strategy session · Doing business in Estonia · Contact us

Related: Estonia e-Residency: the complete guide, EU customs reform 2026 and IOSS.

Sources: EMTA, Tax rates (2024–2026); EMTA, Non-resident as an employer; EMTA, Submission of declaration form TSD; EMTA, Employment registration; EMTA, Social tax; EMTA, Income tax and basic exemption; EMTA, Income from employment; Estonian Ministry of Finance, Taxes; Pensionikeskus, II pillar contributions.

For information only; rates checked against EMTA and the Estonian Ministry of Finance on 28.09.2026. The final burden depends on the employee's residency, the contract and your company structure.