Fringe benefits, staff perks and business travel in Estonia

When an Estonian company gives its people something other than salary, the company usually pays the tax on it. This is the fringe benefit tax (erisoodustusmaks). This guide explains what counts as a fringe benefit, which staff perks are tax-free, and how a company pays tax-free per diems on business trips. It applies to employees and also to the owner who sits on the management board.

In short

• A fringe benefit costs the company income tax of 22/78 of its value plus social tax of 33 percent on the value and that income tax. More
• Health and sports costs are tax-free up to 400 euros per person per calendar year, if every employee gets the offer. More
• A company laptop or phone used for work is not a benefit. Paying the person's private bills is, except the agreed work share of home office running costs. More
• Gifts and meals for staff are taxed. There is no small gift limit. More
• Employees and board members can get a tax-free foreign per diem of 75 euros a day for the first 15 days, then 40 euros. Contractors cannot. More
• A business trip needs a written decision made before the trip. Weeks of remote work from abroad by choice is not a business trip. More

What is a fringe benefit and how is it taxed?

A fringe benefit is goods, a service, a payment in kind or any other benefit with a money value that a company gives to a person because of their work relationship. The company pays the tax, not the person.

Who counts. The rule covers more people than employees. It covers a person under an employment contract, a member of the management or supervisory board (so the owner on the board too), a contractor under a contract for services or a mandate, and a person who has sold goods to the company for more than six months. A benefit given to that person's spouse or relatives, or given by a group company, also counts (Income Tax Act § 48).

Common examples. Paying housing costs, private use of a company car or other asset, insurance that the law does not require, cheap loans, goods given free or below market price, and training that is not related to the job.

What is not a fringe benefit. Cash paid as salary, a bonus or a board fee is not a fringe benefit. It goes through payroll with withheld tax. Tax-exempt payments, such as per diems within the limit, and the company's own business costs are not fringe benefits either (Income Tax Act § 48).

The calculation. The value is normally the market price. The regulation on the price of a fringe benefit gives the details. The company pays:

• income tax of 22/78 of the value (Income Tax Act § 4);
• social tax of 33 percent on the value plus that income tax (Social Tax Act § 2 and § 7).

The tax period is the month in which the company gives the benefit. See how to declare it.

A private benefit that the owner takes as a shareholder, not as a board member, is a different case. It can be a hidden profit distribution or a non-business expense. See corporate income tax on distributions.

The 400 euro health and sports allowance

A company can pay up to 400 euros per employee per calendar year, VAT included, for listed health and sports costs without fringe benefit tax. It must offer the benefit to all its employees. Board members count as employees, so a sole owner on the board can use it (Income Tax Act § 48).

What it covers:

1. entry fees of public mass sports events, such as a public run;
2. the regular use of a sports venue, or massage: a gym, a swimming pool, a sports club, a multi-sport pass;
3. the upkeep of the employer's own sports facilities;
4. dental care, rehabilitation, psychological therapy, physiotherapy or speech therapy by a licensed provider, and nutrition advice by a certified nutrition counsellor;
5. health insurance premiums.

What it does not cover. Sports equipment and clothing, their rental, and extras such as food, transport and parking. These are ordinary fringe benefits (EMTA: Health and sports expenses).

How it works:

• The 400 euros is a yearly limit. The company can pay it at once or over the year. An unused amount does not move to the next year.
• The company cannot deduct the input VAT on these costs, because they are private consumption of the staff (VAT Act § 29).
• "All employees" means every employee gets the possibility in substance. A cap of 400 euros for the board and 10 euros for the other staff fails the condition (EMTA: Health and sports expenses).
• Keep an invoice or receipt for each cost, and keep a running total for each person.

Reporting. Costs within the limit go once a year on form INF 14, by 1 February of the next year. The part above 400 euros is a fringe benefit in the month it arises, on TSD annex 4 (regulation on the tax return forms).

Work tools and home office costs

A phone, a laptop or a desk that the company owns and gives for work is not a fringe benefit. It is a business cost (Income Tax Act § 32 and § 48).

A fringe benefit arises in these cases:

• Private use of company property. The value is the market rent of the asset (regulation on the price of a fringe benefit § 2). The law has no small amount that is exempt. Keep a written policy that limits the tool to work.
• The person keeps the item. For example, the employee keeps the laptop when leaving. The value is the market price, or the book value if it is higher.
• The company pays the person's own bills. Paying a private phone plan, home internet, electricity or rent in full is a benefit at the amount paid (regulation § 6).

The work share of a home office is tax-free. The company can reimburse the work share of electricity, water, heating, waste, internet and similar running costs of the person's home. Set the share by actual use, by floor area, or by time. Where the share is hard to set, the Tax and Customs Board accepts 50 percent. Agree the share in writing before the first payment, and keep the bills. Costs of owning the home, such as a loan payment, land tax or home insurance, are a fringe benefit if the company pays them (EMTA: company office in the home of a board member or employee).

A fixed monthly home office allowance in cash is salary. Without documents, it is money, not a benefit (Income Tax Act § 48). For an employee, all payroll taxes apply. For a board member it is a board fee, with income tax, social tax and the funded pension payment, but no unemployment insurance (Unemployment Insurance Act § 3).

Remote work must be agreed with the employee (Employment Contracts Act § 6). Write in that agreement which equipment the company gives and which costs it pays back against documents.

Gifts, meals and staff events

Gifts and meals that the company gives to staff are fringe benefits. There is no small gift threshold for staff (Income Tax Act § 48).

• Gifts in kind, such as vouchers or goods, are taxed at their market price. For the company's own products, the value is the price that outside customers pay (regulation § 2).
• A cash gift is salary, with payroll taxes.
• Meals the company pays for (a restaurant, office catering, meal vouchers) are a benefit at the amount paid. A daily lunch allowance in cash is salary.
• Drinking water and a kitchen corner at the workplace are business costs. Coffee, tea and other drinks that the employer pays for are a fringe benefit, unless the staff pay for them (EMTA: workplace amenities and drinking water).

Staff events. The law has no specific rule. In practice, an event for all staff that is linked to the business, such as a team day or a Christmas party, is commonly treated as a business cost, because no one person gets an identifiable benefit. No guidance page of the Tax and Customs Board confirms this, so keep the invitation, the programme and the list of attendees. Costs for spouses and children are fringe benefits.

VAT. The company cannot deduct input VAT on catering or accommodation for its own staff, except accommodation on a business trip (VAT Act § 30).

Health insurance, pension payments and childcare

• Health insurance is tax-free only inside the 400 euro health and sports limit. Other insurance that the law does not require is a fringe benefit at the premium (Income Tax Act § 48). Insurance for the company's own risk, such as liability insurance or travel insurance on a business trip, is a business cost.
• Occupational health costs that safety law requires, such as the medical check or glasses for screen work, are business costs and bear no social tax (Social Tax Act § 3).
• Supplementary pension payments (third pillar) for an employee or a board member are free of income tax up to 15 percent of the person's taxed pay for the year and at most 6,000 euros. They are payroll items, not fringe benefits, and social tax is due (Income Tax Act § 13, Social Tax Act § 3).
• Childcare, such as kindergarten fees, school costs or a summer camp, is a fringe benefit at the amount paid. Estonian law has no childcare exemption (regulation § 6).

Who can get tax-free per diems?

Employees under an employment contract and members of the management or supervisory board can receive tax-free business trip costs and foreign per diems. Contractors cannot (Income Tax Act § 13, business trip regulation § 1).

• Within the limits, these payments are also free of social tax (Social Tax Act § 3).
• A contractor can have documented costs paid or reimbursed, such as tickets, the hotel or an event fee. A per diem paid to a contractor is part of the fee and is taxed as such. Agree in the contract which costs the company pays on top of the fee.
• A person with no contract, such as a future co-founder or a partner, gets no tax-free per diem.
• A board member who works from home abroad is not on a business trip there. For a trip from a place of work abroad, the limits of that country apply, not the Estonian limits (Income Tax Act § 13 (3) clause 1^1; business trip regulation § 1 (3)).

The same people can get tax-free compensation for using their own car for work: 0.50 euros per km, at most 550 euros a month, with a trip log. See cars and private use.

Sign the employment contract or appoint the board member before the trip. A shareholder who is not on the board has no tax-free trip regime.

Per diem limits for trips abroad

For a trip abroad, the tax-free per diem is 75 euros a day for the first 15 days of the trip, and 40 euros for each further day. At most 15 days a calendar month count at 75 euros. A trip inside Estonia has no tax-free per diem (Income Tax Act § 13).

When a day counts (business trip regulation § 4):

• the destination is at least 50 km from the border of the settlement where the person normally works;
• the day of departure counts if the transport leaves at 21:00 or earlier;
• the day of return counts if the transport arrives after 03:00.

Above the limit. The part above the limit is taxed as pay, through payroll (business trip regulation § 9).

The minimum for an employee. An employer must pay an employee at least 40 euros a day abroad. It may cut this by up to 70 percent if meals are free. This rule sets what the employee is owed. It does not change the tax-free limit (business trip regulation § 3 and § 4).

Meals on the trip. The per diem covers food. Meals the company pays for abroad on top of a full per diem are a fringe benefit. The company can reimburse documented meals without tax only if it cuts the per diem of those days by the same amount. Breakfast in the room rate is an accommodation cost, and a meal in the plane ticket is a travel cost (EMTA: business trip questions and answers). On a trip inside Estonia, reimbursed meals are a fringe benefit.

Other costs. Travel, accommodation, visa, travel insurance and a conference fee are reimbursed tax-free against documents, with no cap (business trip regulation § 2).

The per diem calculator computes the tax-free amount of a trip.

What makes a trip a business trip?

A business trip needs a written decision of the employer, made before the trip, and a document for each cost. The decision names the destination, the duration, the task, and the rates of compensation and per diem. The decision is the company's decision, also when a sole board member travels (business trip regulation § 1 (4) and § 2 (3)).

Keep:

1. the written decision;
2. a cost document for each cost: tickets or boarding passes, the hotel invoice, taxi receipts;
3. proof of the business purpose: the agenda, meeting confirmations, an event registration.

Without a decision, the Tax and Customs Board taxes the costs paid as a fringe benefit and the per diem as salary (EMTA handbook: fringe benefits). If the traveller adds holiday days, the company does not pay the per diem or the hotel for those days.

The place of work decides. An employee goes on a business trip when the employer sends them outside the agreed place of work (Employment Contracts Act § 20 and § 21).

Remote work abroad is not a business trip. When a founder or an employee chooses to work from Lisbon or Bali for a month, the work could be done anywhere. That is remote work. So:

• no per diem is tax-free, and a daily allowance is salary;
• paying the flat or a coworking desk is a fringe benefit, unless the company needs the desk for a real business reason;
• for work abroad of more than one month, the employer must inform the employee before departure about the country, the duration, the currency of pay and the return conditions (Employment Contracts Act § 6).

A long stay abroad also raises questions about tax residence and a permanent establishment of the company. See founder residency and permanent establishment.

How to declare a fringe benefit and fix a missed one

The company declares a fringe benefit on TSD annex 4, for the month in which it gave the benefit. It files and pays the income tax and social tax by the 10th of the next month (Income Tax Act § 54, EMTA: declaration and tax liability). Annex 4 has one line for each type of benefit (regulation on the tax return forms). See TSD.

A benefit you forgot. The benefit belongs to the month it was given, not the month you find it.

1. Find the month and the value of each benefit.
2. File a corrected TSD for each month in e-MTA, with annex 4. The law requires you to correct an understated return without delay (Taxation Act § 89).
3. Pay the tax with interest of 0.06 percent a day from the day after the original due date (Taxation Act § 115 and § 117).
4. Declare the interest too: it is a non-business expense, taxed at 22/78 on TSD annex 6 for the month you pay it (Income Tax Act § 51).

The Tax and Customs Board can assess the tax for three years from the due date of the return, or five years if the tax was left unpaid on purpose (Taxation Act § 98).

General information, not advice for your situation. The law as in force on 30.09.2026.