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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    A sole proprietor (FIE) working from home

    When doing business, assets for personal consumption must be separated from assets used in business. Assets are often only partially related to business. Depending on the asset, it can be divided into part interests according to the purpose of use, and the size of the part used in business can be found.

    To find/determine the part used in business of each individual asset, you must:

    • distinguish all assets and goods used exclusively in business;
    • distinguish assets and goods that the sole proprietor uses for personal purposes in addition to business (the proportions of business and private use must be determined);
    • determine the proportions of those assets and goods that, in addition to business use, are used for personal purposes by the sole proprietor and their family members (the proportions of business and private use must be determined). The cost of the part of the assets used for personal purposes and/or by family members of the sole proprietor cannot be deducted from income as business expenses of the sole proprietor.

    Last updated on 08.01.2025

    business client

    Last updated: 05.11.2025

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