A bill streamlining social tax payments for services between individuals is back in government. It would shift tax duties to service providers using platforms.
In the fall of 2023, the Ministry of Finance proposed a plan to streamline the payment of social tax. Under current law, when a private individual orders a service, such as cleaning, repairs or childcare, from another individual, the person ordering the service is responsible for registering the service provider in the employment register and paying social tax.
In practice, this virtually never happens. According to the bill’s explanatory memorandum, only about €6,000 in social tax is collected per year under this system. The bill would eliminate this obligation entirely, shifting the duty to pay social tax — just as with income tax — to the person providing the service.
The bill also clarifies how social tax should be handled when services are provided through digital platforms, such as food delivery via Bolt or Wolt.
“A private individual ordering a service is unlikely to realize or be aware that, for example, when ordering food from a courier, they are legally required to register the service provider in the employment register, file a tax declaration (TSD) and pay social tax and social security contributions,” the explanatory memorandum states.
If the law is passed, platforms would become responsible for paying social tax on behalf of individual couriers. However, this obligation would not apply to couriers who operate as businesses or provide services through their own private limited company.
The authors of the explanatory memorandum note that, in practice, platforms will likely push service providers, such as couriers, to operate either through their own company or by using an entrepreneur account, meaning that actual social tax receipts are unlikely to change significantly.
Still, the Ministry of Finance estimates that if the number of service providers using entrepreneur accounts through platforms increased by 1,000 people, tax revenue could rise by €1.3 million per year.
Lastly, the bill also addresses taxation of so-called digital nomads — people who live in Estonia but work for companies not established here. Under current law, foreign companies employing digital nomads in Estonia are required to pay social tax and register as non-resident employers.
Again, this requirement is virtually never met in practice and the bill would remove it. However, digital nomads would be required to hold a valid health insurance policy while residing in Estonia.
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