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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    Transport of employees - FAQ

    1. Is taking a taxi home from work at night, if the nature of the job requires it, a fringe benefit or not?

    Covering transport costs of coming to work by taxi based on documentation is not considered a fringe benefit, if, due to the working regime, it is not possible for the employee to use public transport to come to work or go home.

    2. If a person lives in a place where there is no public transport, is driving to work and home from work not considered a fringe benefit? Which documents should be formalised for it?

    If the workplace is in a place that is not connected to public transport or due to the work regime, the hours are not suitable, then it is possible to use the employer's car, exempt from tax, for rides between home and workplace. But in this case, if necessary, it must be proved to the tax authority that it was not possible to get to work or home from work using public transport at that time of day.

    3. If a company organises and compensates for the transport of its employees to work, for whom using public transport for going to work and home would cost 2/3 of their salary (an unreasonable amount for the employee, it would be more rational not to go to work at all), is it a fringe benefit or not?

    Whether the expense is considered a fringe benefit or not does not depend on the salary of the individual employee.

    Last updated on 08.01.2025

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    Last updated: 05.11.2025

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