The government in February decided that the immigration quota will not be raised above 0.1 percent of the Estonian population, or 1,317 people per year. At the same time, however, top specialists will be excluded from the quota and the maximum limit of short-term employment in Estonia will be extended from a period of nine months to one year.

Based on the government's decision, the Ministry of the Interior developed amendments to the Aliens Act, which the ministry sent out for coordination on Thursday. Based on the letter of explanation accompanying the amendments, it is expected that as a result of the amendments, the number of foreigners working in Estonia on a short-term basis will increase by 2,500 people, not including the 124 top specialists working here with a temporary residence permit.

Should there be 2,500 additional employees registered for short-term employment who work in Estonia for a period of one year and who are paid in accordance with requirements the average gross wage, according to calculations, the state can expect to receive approximately €12.6 million in additional social tax per year.

The average gross monthly wage in the fourth quarter of 2017 was €1,271, of which the employer pays 33 percent, or €419 euros, per month in social tax. Thus, based on ministry calculations, the state will receive approximately €12.6 million in additional tax income via social tax paid by employers. In addition, foreign employees also consume goods and services locally as well.

Specialists in particular to bring in extra tax income

According to the 2017 economic forecast of the Ministry of Finance, the GDP and tax income per employed person is on average €34,400 and €12,000 per year, respectively. If 124 top specialists are added to the Estonian economy in 2018 with the amendment of the Aliens Act, according to ministry calculations, this will bring in an additional €3 million per year in tax income.

Namely, the tax income from a top specialist is higher than the Estonian average — they work under a temporary residence permit and are paid double the average gross monthly wage. According to the Ministry of the Interior's calculations, 124 top specialists will bring in an additional €3 million per year in tax income.

An annual immigration quota of 0.1 percent of the permanent population of Estonia was implemented in the 1991 Immigration Act in order to limit immigration. An immigration quota on the same basis was implemented in the 1993 Aliens Act.

The previous immigration quota does not include individuals who come to Estonia to study, work in positions in the information and communication technology (ICT) field, startups or in connection with research activity, or people who come to Estonia for entrepreneurship purposes in connection with startups and large investments. The quota likewise does not include those employed in Estonia on a short-term basis or citizens of the EU, U.S. or Japan.

Despite these exceptions, the immigration quota for the year was nonetheless met both last year and the year before, and in last year's case by July already. Based on this fact, Minister of the Interior Andres Anvelt (SDE) proposed to the government changing the immigration quota to avoid a situation in which the quota regulation becomes an obstacle to bringing in workforce from outside the EU.

Other measures for supporting immigration

The government decided not to raise the immigration quota, opting instead to alleviate immigration restrictions via other means — by extending the maximum length of employment in Estonia on a short-term basis as well as excluding top specialists from the annual quota.

The government also recently supported a proposal according to which foreigners are obligated to demonstrate Estonian language skills on the A2, or elementary, level when extending their residence permit. By the time they are required to extend their residence permit, a foreigner will have been living in Estonia for five years, during which time they will have had the opportunity to learn Estonian both in a language program offered by the state as well as independently, the Ministry of the Interior said early last month.

On average, altogether 1,740 temporary residence permits for employment have been issued per year since 2014, with an on-year increase to 2,273 recorded in 2017.

The number of short-term employment registration decisions rose sharply last year. While approximately 1,800 short-term employees were registered in 2015 and 2016 each, the Police and Border Guard Board (PPA) registered a total of 7,584 such employees in 2017.

The PPA is forecasting around 10,000 short-term employment registration applications for 2018, which is 2,416 more than in 2017. It is likely that the increasing of the short-term employment period will lead to an increase in the registration of short-term employment of up to one year, as it allows for the employment of foreign employees with temporary residence permits in fields sensitive to the cyclicality of economic development as well as reduces the need for applying for temporary residence permits for work opportunities lasting up to one year.