Unemployment insurance premiums

The premiums are collected in parallel with the collection of withheld income tax and personalised social tax and are declared on a joint tax declaration (form TSD).

The cash-based accounting principle is used when withholding the insured person's insurance premiums and calculating the employer's insurance premiums, which also applies to withholding income tax and calculating social tax. This means that the premium is calculated and withheld from payments made in a calendar month, regardless of which month the fee is calculated for. (§ 42 of the Unemployment Insurance Act)

Employers must:

• calculate and withhold in the rate (1.6%) established for the insured person on the payments paid to the insured person.
  The obligation to calculate and withhold the insured person's unemployment insurance premiums ends on the last day of the month in which the insured person reaches pensionable age or is granted an early retirement pension.
• take into account the unemployment insurance premium rate established for the employer;
• transfer the employer's insurance premium and the withheld insurance premium of the insured person calculated from the payments to the bank account of the Estonian Tax and Customs Board (ETCB) no later than by the 10th day of the month following the month in which the payment was made and submit the declaration form TSD to the ETCB by the same date;
• provide the insured person, at their request, with a certificate of unemployment insurance premiums withheld from payments by 1 February of the year following the calendar year or upon termination of the employment relationship with the insured person, together with the final settlement;
• at the request of the insured person, upon termination of the employment relationship, provide him/her with a certificate of the types and amounts of remuneration paid in the last 3 calendar months of employment and the unemployment insurance premiums withheld from the remuneration, by calendar month.

The form of the certificate is established with the Regulation No 59 of 30.06.2009 of the Minister of Social Affairs according to subsection 2¹ of § 42 of the Unemployment Insurance Act. This form is submitted by the insured person to the Unemployment Insurance Fund, if necessary, when applying for unemployment insurance benefits, and it is not used when completing the income tax return of a natural person.

The Estonian Tax and Customs Board (ETCB) transfers the received unemployment insurance premiums to the account of the Estonian Unemployment Insurance Fund within 15 working days of their receipt in the bank account of the ETCB. The ETCB also provides the Unemployment Insurance Fund with data on unemployment insurance premiums paid by the insured person and the employer (§ 35 of the Unemployment Insurance Act).

The Estonian Unemployment Insurance Fund has been determining and paying unemployment insurance benefits since 01.01.2003.

The guide explains the specifics of withholding unemployment insurance premiums at pensionable age and for persons receiving early retirement or flexible pensions and persons receiving other types of pensions. Pursuant to clause 1 of subsection 1 of § 42 of the Unemployment Insurance Act, unemployment insurance premiums (at a rate of 1.6%) are not withheld from payments made to a person if the person is:

1. a person who has reached the pensionable age specified in § 7 of the state pension insurance act;
2. a person who has been granted early retirement pension on the basis of § 9 or flexible old-age pension on the basis of § 9¹ of the state pension insurance act.

The aforementioned persons are exempt from paying unemployment insurance premiums (1.6%) by withholding, because in the event of job loss, the law does not allow them to register as unemployed and therefore apply for unemployment insurance benefits.

The obligation to withhold the insured person's unemployment insurance premiums ends on the last day of the month in which the employee reaches pensionable age or is granted the early retirement pension or flexible old-age pension.

An early retirement pensioner is a person who has worked for the required pensionable service period for the determination of an old-age pension and has been granted the early retirement pension for up to three years before reaching the old-age pension age.

A person is entitled to a flexible old-age pension up to five years before and at any time after reaching the old-age pension age.

When entering annex 1 of the declaration form TSD in the e-services environment e-MTA, the TSD application automatically calculates the employee's and employer's unemployment insurance premiums payable for this person based on the entered personal identification code and payment data (code 1130 and code 1140 of annex 1, respectively). In this regard, codes 1120, 1130 and 1140 are not active in the line for adding on the annex 1 to the form TSD entered in the e-services environment e-MTA, meaning that the taxpayer cannot fill them out themselves.

The basis for calculating unemployment insurance premiums is the payment taxable with unemployment insurance premiums in the unemployment insurance premium code 1120, where the data on the payment amount from code 1030 is entered to the type 10, 11, 14, 17, 18, 19, 25, 26, 52 of code 1020 accordingly, i.e. for those types of payments that are taxable with unemployment insurance premiums (see the table of types of payments in annex 1 to the form TSD).

In code 1130, the withheld unemployment insurance premium is calculated at the unemployment insurance premium rate of 1.6%.

Code 1130 is calculated if the personal identification code (code 1000) of the person indicates that the person is not of pensionable age or an early retirement pensioner.

If the personal identification code (code 1000) indicates that the person is of pensionable age or in early retirement, then code 1130 = 0.

If the personal identification code (code 1000) indicates that the person is not of pensionable age or in early retirement, then code 1130 = code 1120 × the insured person's unemployment insurance premium rate (in years 2015–2028 it is 1.6%).

The basis for checking the pensionable age is the person's gender and date of birth contained in the personal identification code (code 1000).

To distinguish persons of pensionable age from other persons, the tax authority's tax declaration computer program is based on the person's gender and date of birth in their personal identification code. Therefore, in this case, the person's age is taken into account, regardless of whether the person has already been granted an old-age pension after completing the formalities necessary to receive the pension.