Key changes in taxation of temporary agency work came into force

Based on the rules in force until the end of 2020, Estonia was entitled to tax wages of non-residents starting from day one if the entity making the payment was located in Estonia.Based on the rules in force until the end of 2020, Estonia was entitled to tax wages of non-residents starting from day one if the entity making the payment was located in Estonia.

If the payer was located abroad, the right of taxation in Estonia arose only if the employee had been in Estonia for the purpose of employment for 183 days. Based on an amendment to the Income Tax Act that entered into force from the beginning of this year, wages earned by a foreign worker in Estonia are taxable in Estonia if the employer is located in Estonia. It is specified separately that in the case of a temporary agency worker, the company using the employee (user undertaking) is considered to be the employer.