Fringe benefits

By its nature, fringe benefit is the income of the recipient (employee), but paying income and social tax on the fringe benefit is the obligation of the person granting the benefit (employer). Fringe benefits i.e. benefits provided by the employer to the employee are subject to income tax at a rate of 22/78 and social tax at a rate of 33%.

Pursuant to subsection 1 of § 48 of the Income Tax Act, employers pay income tax on fringe benefits granted to employees.

Based on clause 7 of subsection 1 of § 2 of the Social Tax Act, social tax is paid on fringe benefits within the meaning of the Income Tax Act, expressed in monetary terms, and on income tax payable on fringe benefits.

Declaration

The period of taxation of fringe benefits is one calendar month. The employer declares the fringe benefits granted to employees and income and social tax calculated on fringe benefits during a calendar month in Annex 4 of the form TSD, which must be submitted together with the form TSD to the Estonian Tax and Customs Board by the 10th day of the month following the calendar month in which the fringe benefit was granted. The tax amount is paid to the bank account of the Tax and Customs Board by the same date at the latest.

Form TSD and Annex 4 of the form TSD Instructions for filling in Annex 4 of the form TSD (in Estonian)

 Legal basis

Income Tax ActProcedure for determining the price of fringe benefitsRegulation No. 110 of the Government of the Republic “Procedure for the payment of compensation for the expenses of a business trip and the minimum daily allowance for a business trip, the conditions and procedure for payment” of 1 July 2009Regulation No.164 of the Government of the Republic “Procedure for keeping account of and payment of compensation for the use of personal passenger cars in the performance of service, employment or official duties” of 14 July 2006

Handbook “Fringe benefits”

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    Business trips within Estonia

    An employee is on a business trip if an employer sends the employee to perform their duties to a place other than their usual place of work, including both within Estonia and outside Estonia (a business trip abroad).

    In the case of a business trip within Estonia, it is not possible to pay tax-exempt daily allowance for a business trip to an employee. If the employer does decide to pay a daily allowance on a domestic business trip, this payment is considered part of wages and must be taxed and declared as wages (Annex 1 to the TSD).

    Employees must be reimbursed for all reasonable expenses incurred by them in the performance of their duties. Costs that are considered reasonable are those that are necessary for the performance of duties, i.e. without which the duties could not be performed or the quality would suffer significantly.

    Examples of business trip costs:

    • travel expenses to the destination,
    • accommodation,
    • parking costs, etc.

    More information on business trips within Estonia can be found from the "Tööelu" portal (the Labour Inspectorate's information channel).

    Last updated on 07.08.2025

    business client

    Last updated: 05.11.2025

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