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Changes in the tax exempt basic allowance

The Estonian Parliament adopted on 13 December 2017 the draft law changes to the social tax and income tax legislation, which inter alia amended the new rules of the tax exempt basic allowance which will become effective from 2018:
• Retired persons receiving pension income will be entitled to submit application for the calculation of tax exempt basic allowance to several withholding agents, if they receive income both from the Social Insurance Board and from any other withholding agent.
• According to the Tax and Customs Board, such right to submit several applications applies only in case the respective amounts of pension and salary received by the retired person will be both less than EUR 500 per month.
• In addition, the respective right is restricted so that the total amount of such basic allowance on both applications submitted by the retired person can not exceed monthly EUR 500.
• Retired persons, who did not receive any income subject to social tax during 2017, will be deemed to have submitted the application to the Social Insurance Board for the calculation of tax exempt basic allowance to the extent of EUR 500. Thus, these retired persons who were not employed during 2017 are not required to submit any application to the Social Insurance Board, as the Board will apply the tax exempt basic allowance to their pensions automatically from the year 2018.