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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Keeping records of the use of the car
A taxable person who applies the aforementioned exceptions and has fully deducted the input VAT on the car and related expenses must ensure that the use of the passenger car in question for non-business rides is not possible and may continue to keep records of the use of the car.
The entrepreneur decides which way to keep records – the goal is to ensure that the entrepreneur's passenger car is used only for business purposes. For example, an entrepreneur can, among other things, keep a detailed record, i.e., a driving log, or use a GPS service provided by a third party.
In general, a car used exclusively for business purposes should be parked at the company during non-working hours.
The company must decide:
- how a car is used,
- how such use is secured, and
- how it is possible to check the use of the car both by the management and the tax authority.
Last updated on 08.01.2025
Last updated: 05.11.2025