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 20/80 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 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 - taxation of fringe benefits

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Sports assignments

The provisions of the Business Trip Regulation also apply to the taxation of compensation of travel and accommodation expenses and daily allowance paid to the persons specified in § 7 of the Sports Act in connection with sports assignments.

A sports organisation has the right to send athletes who are its members or members of the sports organisation which is its member, and coaches, judges, sports doctors and other persons connected with the organisation of sport outside of the location of the permanent place of employment of the person who is sent to the sports assignment (§ 7 of the Sports Act).

Although in the event of sports assignment of the persons specified in § 7 of the Sports Act, the Business Trip Regulation applies to the taxation of compensation for travel and accommodation expenses and daily allowance, the daily allowance paid above the limit is not taxed as employment income, as generally sports organisations do not have employment contract relationships with persons sent on assignments.

Amounts exceeding the limit are declared on Annex 1 of form TSD by using the payment type 51.

Last updated: 23.01.2024

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