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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Occupational health care
Taxation of occupational health costs
The occupational health obligations of employers are provided for in the Occupational Health and Safety Act and legislation issued on the basis thereof. According to these, expenses incurred by the employer for the health of employees and for ensuring the safe and secure working environment of employees (i.e., expenses incurred by the employer for the performance of its duties) are treated as business-related expenses.
The taxation of expenses related to the provision of occupational health services will distinguish between the cases in which the expenses are mandatory by the employer, when the expenses are fringe benefits, or expenses not related to business.
According to subsection 2 of § 32 of the Income Tax Act, expenses are related to business if the expenses are incurred for the purpose of obtaining business income subject to taxation or are necessary or appropriate for the preservation or development of such business and the connection of the expenses to business is clearly justified and also if it arises from subsection 1 of § 13 of the Occupational Health and Safety Act, other sections of this Act or occupational health legislation.
The expenses incurred in the activities listed in § 13 of the Occupational Health and Safety Act (including carrying out a risk assessment and taking measures arising from the latter) are business-related expenses and are not subject to taxation as a fringe benefit or non-business-related expenses.
If the expenses are not made on the basis of the Occupational Health and Safety Act, the expenses will be taxed as a fringe benefit.
Example
The employer has vaccinated 10 employees and paid for the vaccination of these 10 employees. Due to the nature of the work and according to the recommendations of the occupational health doctor, the employer was obliged to vaccinate only 6 employees. Thus, the cost of vaccinating 4 employees is a fringe benefit.
In certain cases, where the cost incurred is not related to the transfer of the benefit to the employee, it may be an expense not related to business.
Last updated on 10.03.2025
Last updated: 05.11.2025