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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Emergence of fringe benefit on employer's vehicles
According to subsection 4 of § 48 of the Income Tax Act, fringe benefits are any goods, services, remuneration in kind or monetarily appraisable benefits which are given to an employee in connection with working for an employer. Among other things, the use of a vehicle of the employer free of charge or at a preferential price is considered fringe benefit.
The purpose of taxation of fringe benefits is equally to tax both monetary and non-monetary benefits given to an employee. It is important to note that the employee's monetary income is taxed as a fringe benefit, not the employer's expense. Therefore, it can sometimes happen that the employer has not (directly) made an expenditure, but a fringe benefit has still been granted and the tax liability has arisen.
Last updated on 08.01.2025
Last updated: 05.11.2025