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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Transporting employees to work and home
Transport of employees to work and home pursuant to subsection 51 of § 48 of the Income Tax Act
An employee is:
- a person employed under an employment contract
- an official (subsection 1 of § 13 of the Income Tax Act)
- a member of a management or controlling body (§ 9 of the Income Tax Act)
- a natural person who sells goods to an employer during a period longer than six months
- a natural person who works or provides services based on a contract for services, authorisation agreement or any other contract under the law of obligations
Expenses for employee transportation to and from work are not considered a fringe benefit if:
- it is impossible to make the journey using public transport with a reasonable expenditure of time and money
- disabled employees are unable to use public transport or if use of public transport causes a material decrease in the persons’ ability to move or work
- the employer arranges transportation of an employee employed under an employment contract using a vehicle with at least eight seats or with a bus for the purposes of the Traffic Act
- the place of residence of the employee employed under an employment contract is located at a distance of at least 50 kilometres from the place of work
Since the tax incentive does not automatically extend to all expenses incurred by the employer for arranging transportation between the employees' home and workplace, it is necessary to define the compliance of the incurred expenses with the principles set forth in subsection 51 of § 48 of the Income Tax Act.
Beginning from 1 January 2020, the cost of public transport tickets used for transportation between employees' home and workplace are not taxed as fringe benefit.
The tax incentive is extended to all employees (an employee working on the basis of an employment contract, an official, a person who works or provides services on the basis of a contract under the law of obligations, a member of a management or controlling body and a natural person who sells goods to the employer during a period longer than six months).
When reimbursing the cost public transport tickets:
- the distance between the place of residence and the place of work is irrelevant
- costs can be reimbursed only based on cost documents
Last updated on 08.01.2025
Last updated: 05.11.2025