Income tax of 2018

Generally, tax season in Estonia is an easy time. You have to look through the prefilled digital tax form and just sign it. I think it usually takes about 3 minutes. 

As we had tax reform some time ago 2018 was the first time when the flexible basic exception was actually in use. So this year had surprises to many people... This meant that the people who were afraid of the new system asked to be taxed more than necessary throughout the year and now got a refund. And others had a nasty surprise of needing to pay more. So you either gave an interest-free loan to the state or now need to pay some back. The people who need to pay some of it back usually did not realise that if they had any additional income this was not just taxed at 20% but this also meant that they lost some of the tax free balance they had so also some other income was additionally taxed. I wish we had clear tax brackets where a person could know that if I earn this or this much my tax free amount a year is x. 

But no, now in Estonia we have some "lovely" complicated system for it:

• If your yearly income is less than 14 400 € the annual basic exemption is 6000 euros. So if you earn 10 000 a year, 6000 € is tax exempt and 4000 € is taxed at 20%, which means you pay 800 € in income tax.
•  If you earn above 25 200 € the basic exemption is 0 and all your income is taxed at 20%, so earning 30 000 € a year means you pay 6000 € in income tax.
• And if you are the majority of the population who earns between these 2 numbers of 14 400 euros to 25 200 euros, you need to take learn this rule by heart: 6000 – 6000 ÷ 10 800 × (income amount – 14 400). So even if a bank pays you dividends it changes your basic taxation. 

For me the tax report does not take 3 minutes, it took weeks and weeks to get the 14-page report in order. In general, it is rather easy. My wages, sickness benefit etc are sent in automatically, I just had to add most of my investments. The LHV growth account can be sent on automatically, also EstateGuru offers this service. So this just leaves the other portals. Most of them offer easy yearly income overview so it is just a matter of entering the data to the correct parts of the form. The issue I had for the second time in a row was CrowdEstate. For investments in their portal, the income tax has already been deducted and the clients to whom I borrowed the money should declare it themselves. Most of them had nicely entered the data and it was there the day tax reports become available. But for 2  companies it took them weeks and weeks: the Vakning OÜ and Starelement OÜ gave me a headache. They finally appeared about a week before the deadline of submission. All others were there before the 2 month submission period started, so shame on them. Vakning was the one most delayed and this was the company which had the same problem a year before as well (financial issues?). If I could leave them out of my auto-invest in the platform - I would do it in a heartbeat. Too much hassle and grey hairs, and for what?

So, most of my income tax had been deducted by my employer as well as some of the portals. The LHV Growth Account allows the postponement of the taxes, so only for portals like Mintos, Bondora, EstateGuru, Grupeer, Envestio I need to pay an additional tax (plus the tax which comes from the added income and the lowering of my tax exemption of course as well).

By 1st of October this year I need to pay additional 306,80 € to the Tax and Customs Board which means I had 1199,37 € income from my investments and if you think the numbers do not add up, this also made some of my wages to be taxed due to the crazy tax law. I mean 20% of 1200 would be 240€ and taking into account that several income strains are either tax-deferred or already tax paid... should mean it gets smaller, not bigger. Well, this turned into a rant, but I hate this system. Not because it is unfair or something, but just because the numbers really do not add up. And if it is complicated for me, a person who actually loves math and personal finance topics, think of for example retired people who might be totally clueless of this system.