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.
Legal basis
Handbook “Fringe benefits”
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Declaration and tax liability
Declaration of fringe benefits
Fringe benefits are declared on Annex 4 of tax declaration Form TSD by the tenth day of the following month. Enabling the use of the employer's car is declared in Annex 4 of the Form TSD under code 4040 "The enabling of a use of a vehicle of the employer for activities not related to employment or service duties or to the employer’s business". The tax liability on fringe benefits is usually paid on the basis of Form TSD.
Tax liability on fringe benefits
The tax liability of the fringe benefit is calculated on the engine power of cars (1.96 euros per kW or, if the car is older than five years, 1.47 euros per kW).
Example 1
For a new 190 kW passenger car, the price of the fringe benefit is 1.96 × 190 = 372.40 euros, and taxes are calculated on it as follows:
income tax 372.40 × 22/78 = 105.04 euros
social tax (372.40 + 105.04) × 33% = 157.56 euros
total tax liability is 105.04 + 157.56 = 262.60 euros.
Example 2
For a new 90 kW passenger car, the price of the fringe benefit is 1.96 × 90 = 176.40 euros, and taxes are calculated on it as follows:
income tax 176.40 × 22/78 = 49.75 euros
social tax (176.40 + 49.75) × 33% = 74.63 euros
total tax liability is 49.75 + 74.63 = 124.38 euros.
Last updated on 08.01.2025
Last updated: 05.11.2025