Training expenses reducing the taxable income, tax credit

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Name of the instrument - Local language
Koolituskulude võrra maksustatava tulu vähendamine
Name of the instrument - English translation
Training expenses reducing the taxable income, tax credit
Scheme ID
67
Country
Estonia
Reporting year
2020
Type of instrument
Tax incentive for individuals
Sub-type of instrument
Tax support for families and their costs for education
Type of entry
Single instrument
Short description

Adults can deduct costs related to continuing vocational training for their current occupation or a future occupation from the base of their individual income tax. The state co-funding - in the form of foregone tax revenues - equals eligible costs multiplied by the tax rate of 20 %. The eligible group of applicants includes persons enrolled in formal education and their family members in descending line enrolled in formal education and younger than 26 years old. Eligible costs include tuition fees and costs for teaching material. Furthermore, tuition fees of relatives in descending line (fees for kindergarten, tuition fees for the higher education of children) can be deducted. Individuals with no taxable income (an annual gross salary below EUR 6 000) cannot profit from the tax deduction. The annual limit is EUR 1 200 per person (including housing loan interest and other deductions) but the deductions exceeding this limit can be transferred to a spouse. The tax incentive can be used once in each calendar year.

Level of operation
National
Name of a part of the country
Not applicable
Name of the region (for regional instruments)
Not applicable
Name of the sector (for sectoral instruments)
Not applicable
Relevance
Key instrument
Income Tax Act (§26)
Objective(s) and target(s)
Not available
Year of implementation
2000
Year of latest amendment
2015
Operation/management
The Parliament issued the legal act; Ministry of Finance manages fiscal revenues; Estonian Tax and Customs Board collects taxes and monitors the data
Eligible group(s)
Individuals enrolled in formal education and their family members in descending line enrolled in formal education and younger than 26 years old
Group(s) with preferential treatment
A resident natural person has the right to deduct the training expenses of himself or herself or a relative in descending line, sister or brother of fewer than 26 years of age or, if no such training expenses are incurred, the training expenses of one permanent resident of Estonia of less than 26 years of age, from the income which the resident natural person receives during the period of taxation
Education and training eligible
General and specific; any kind of certified training - formal education, non-formal education both job-related and hobby courses, life skills courses.
Source of financing and collection mechanism
State (loss of tax revenue); individual
Financing formula and allocation mechanisms
Up to 1 200 EUR/year per person. The sum of eligible expenses is deducted from an individual's total income for the same period of taxation thereby reducing the tax base. The deductions are reimbursed to individuals annually based on submitted individual tax declarations.
Eligible costs
Tution fees for any type of registered education/training activity, except for motor vehicle driving training. Hobby education is covered for under 18 years old individuals.Eligible costs include also learning materials, kindergarten fees (but not meals).
Volumes of funding
Volumes of funding:2017: EUR 64 429 5452018: EUR 61 539 2052019: EUR 66 636 052
Beneficiaries/take up
Total number of beneficiaries:2017: 1592018: 1702019: 172
Organisation responsible for monitoring/evaluation
Ministry of Financial Affairs as it is part of state budgeting (monitoring/evaluation of the tax incentive instrument gets little attention)
Monitoring/evaluation reports available
Not available
Most relevant webpage - in English
https://www.riigiteataja.ee/en/eli/530012014003/consolide
Most relevant webpage - local language
https://www.riigiteataja.ee/akt/123122013023
Recent changes

Since 2015, income tax has decreased from 21% to 20%. It reduced the overall tax burden. The overall reform of taxation took place in 2014 whereby the flat rate of income tax was reduced to 20%. Other measures included raising the non-taxable annual income (towards 6 000 EUR/year) as a way to better protect low-income earners.

Recent changes in response to COVID-19

No changes

Sources
Consolidated texts of English translations of Estonian legislation
Estonian Tax and Customs Board
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