How We Calculate Estonian Net Pay — Methodology

How we calculate Estonian net pay

The calculator follows the Income Tax Act, the Unemployment Insurance Act, the Funded Pensions Act and the social tax rules, as the Tax and Customs Board (EMTA) applies them to salaries. Rates and amounts come from the 2025 and 2026 versions of the Income Tax Act and the Board's summaries — see data sources.

Employee contributions

The employee pays 1.6% of gross pay as unemployment insurance; the employer pays another 0.8%. Members of the mandatory funded pension (II pillar) pay 2%, 4% or 6% of pay; 2% by default. Both payments are deducted before income tax is worked out (Income Tax Act § 42(5) and (6)).

Basic exemption

In 2026 the general basic exemption is €700 a month, or €8,400 a year, whatever the income. In 2025 it was up to €654 a month and shrank for payments above €1,200 by the formula 654 − 654 / 900 × (payment − 1,200), reaching zero at €2,100; for the year, 7,848 − 7,848 / 10,800 × (income − 14,400). The employer applies the exemption only on the employee's written application, and with one employer only. It cannot exceed pay after contributions.

Income tax

Income tax is 22% of gross pay less unemployment insurance, the funded pension payment and the basic exemption. Amounts are rounded to the cent, as in the examples of the Board's TSD return guide.

Annual tax return

After the year, tax is worked out on the year's income with the annual basic exemption. Where the exemption was not applied every month (for example, no application was given), the overpaid tax is refunded. The estimate assumes the same pay in every month and no other income or deductions.

Employer cost

Employer cost is gross pay plus 33% social tax and 0.8% unemployment insurance. Social tax is due on at least the monthly base (€820 in 2025, €886 in 2026, i.e. €292.38 a month) when pay is lower and no exception applies. Out of social tax the state pays 4% into the employee's funded pension account.

Tests

Test	Scope	Result
TSD guide example 1	Pay of €2,100, 2% funded pension, €700 exemption: contributions, income tax €291.37 and net pay €1,733.03	Identical to the cent
TSD guide example 3	Pay of €600: social tax on the monthly base €292.38, exemption €578.40, net pay €578.40	Identical to the cent
Exemption formulas	2025 monthly and annual formulas from the Income Tax Act; €700 in 2026	Tested
Worked example at €1,500 (2025)	Contributions, exemption of €436 and income tax of €222.20 worked by hand	Matching
Pay without an application	Tax from the first euro and the refund through the annual return	Tested

Not yet included

The pension-age basic exemption (€776 a month) and drawing a pension at the same time.
Several employers, board member fees, service contracts and business income.
Fringe benefits, holiday and sickness pay and the birth allowance.
Deductions for training costs, donations and III pillar payments in the annual return.
Exceptions to the social tax monthly base, for example for employees with partial work ability.

Estimates only. Not tax, legal or financial advice.