The effects of COVID-19 can be felt the world over and Estonia is no exception. We may be a forward-thinking and technologically savvy nation, but we have been affected in the same way as many other countries when it comes to coronavirus.
With social distancing and ‘lockdown’ measures in place, small businesses have struggled to stay afloat. Budding entrepreneurs, freelancers and the self-employed alike are trying to deal with the economic implications of this pandemic alongside the medical ones.
In order to help businesses that have lost a significant amount of their income, the government has announced a support plan of 2 billion euros. This is a great step in the right direction, but many small businesses and independent workers are now confused as to how to access this help and what applies to them.
To this end, we have gathered the information we can about the Estonian support measures and compiled them in this blog.
One-time grants
Small businesses, including e-resident companies, and self-employed persons who have suffered because of the coronavirus crisis, are entitled to apply for a one-time non-refundable grant.
The amount of the grant depends on the turnover of your Estonian company.
| The amount of the grant (€) | Turnover in 2019 (€) |
| 3,000 | at least 20,000, but less than 40,000 |
| 5,000 | at least 40,000, but less than 100,000 |
€5,000 grant can be applied, if the turnover of the company has decreased at least 30% in March and April 2020, compared to the same months in 2019. Companies which have been established recently are also eligible for these grants.
Applications can already be submitted and the total amount of the grants is limited meaning that the government supports such grants up to the total amount of €10 million.
There are several requirements to qualify for the grant. For example, you have to have at least one employee with tax residency in Estonia as of March 1, 2020. More information can be found on the webpage of Enterprise Estonia.
If your company is active in the tourism sector, you should check whether there are higher alternatives for a one-time non-refundable grant. More information can be found on the webpage of Enterprise Estonia.
Guarantee and loan measures
The state-owned financial institution KredEx has announced that it will be providing loan support. A loan guarantee is beneficial if a company wishes to utilise a bank loan, a lease or bank guarantee but lacks sufficient collateral or operating history.
The implementation of this support from KredEx will be handled by the Estonian banks. Make sure you check out the Kredex website to get the most up-to-date and timely information.
Tax relief
In order to try and combat the negative economic effect of the coronavirus crisis, the Estonian tax authorities will not be calculating interest on taxes that are not paid in a timely manner. The good news is that you do not have to submit an application in order to be eligible for this since the changes apply to everyone automatically.
Bear in mind though that tax returns by small businesses do still need to be submitted by due date.
If your Estonian company is having difficulties in paying taxes, you do need to contact the tax authorities in order to determine whether you can pay tax debts in instalments.
These measures will be available from March until May 2020. More information can be found on the Tax and Customs Board website.
Reduction of salaries
If an employee’s salary has been reduced due to the COVID-19 crisis, the Unemployment Insurance Fund will pay the employee a compensation package that is up to 70% of their average salary. The maximum amount of compensation that is able to be awarded stands at €1,000.
Make sure you take into account that the employer still has to pay any employee who receives wage compensation a gross salary of at least €150. Wage compensation related taxes are paid by the fund and the employer has to pay taxes on the actual amount that it pays to the employee.
At least two of the following criteria must be met to qualify for the monthly employee compensation:
- the turnover of the employer’s business must have decreased by at least 30% due to coronavirus (this comparison is made on a year-to-year basis comparing each month with the same month of the previous year);
- the employer is not able to provide work to at least 30% of their employees to the extent that was agreed before the crisis started;
- the employer has reduced the salaries of at least 30% of all employees (the reduction must have been at least 30%, or the salary corresponds to the minimum salary level established by the law, i.e. €584 as a gross amount).
Compensation can be applied to any employee whose salary has been subject to Estonian payroll taxes. It is available for two months during a three-month period (from March until May 2020).
Please note that board members are not eligible for this compensation.
More information can be found on the Unemployment Insurance Fund webpage.
For more tips and advice on how to cope with the coronavirus pandemic as a small business read our blog on how to do business when you can’t travel or read some of our inspiring case studies of Xolo clients who are managing to do more than just survive.
Note: The information contained in this document is for general guidance only and is not legal or tax advice. Xolo takes no responsibility for the accuracy of the information provided. You should not rely upon the information contained in this article to make any business, financial or legal decisions before you have taken qualified financial or legal advice in your own country.
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