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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Transport of employees employed under employment contracts
There are additional tax incentives for the transport of employees working based on employment contracts.
The tax incentive extends only to employers engaged in business, non-profit associations, foundations, and legal persons in public law. The tax incentive does not extend to the public sector.
An employer has the option to choose whether:
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a bus or a vehicle with at least eight seats is used for transportation between the employees' residence and workplace. The distance of the employees' place of residence from the workplace is not decisive (i.e., employees can be transported by bus, for example, even within one settlement)
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a car in the ownership or possession of the employer is used (the employee's place of residence is at least 50 kilometres from the workplace)
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transport costs are reimbursed based on a cost document, regardless of the type of transport (the employee's place of residence is at least 50 kilometres from the workplace)
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the employee uses a personal car (the employee's place of residence is at least 50 kilometres from the workplace)
If the employer and the employee agree that the employee will use a personal car, the employer has a choice whether:
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rides between work and home are reimbursed based on the regulation on compensation for the use of a personal car (based on driving records, up to 550 euros per month) or
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based on expense documents (fuel checks)
The above also extends to the situation when an employee with an employment contract travels to work, for example, from Kyiv and from Tallinn back to his place of residence in Kyiv.
Last updated on 08.01.2025
Last updated: 05.11.2025