October 2024
In mid-September, the Ministry of Finance of Estonia sent proposed amendments to the law for approval, which will revise several tax-free thresholds.
The draft aims to update the provisions regarding daily allowances for business trips abroad, provision of meals to ship and aircraft crews, representation expenses promotional gifts, employee accommodation, health promotion expenses, souvenirs donated by non-profit organizations and compensation for the use of personal vehicles. These provisions haven’t been changed for a long time and are no longer aligned with the recent increase in the cost of living.
The tax exempt per diem allowance for employees in case of business trips abroad increases from 50 euros to up to 75 euros. The limit of 75 euros applies for the first 15 days, after which the tax exempt limit of the allowance drops to 40 euros per day instead of the previous 32 euros.
The current limit of tax exempt compensation for the use of a personal vehicle for business use is 30 cents per kilometer and up to 335 euros per month. After the amendment enters into force, it will rise to 50 cents per kilometer with a limit of up to 550 euros per month.
The annual limit of 400 euros for tax exempt expenses related to employee health promotion will remain in place, but its application will become more flexible. Employees can now use the full amount tax exempt at any time throughout the year, rather than being restricted to 100 euros per quarter. According to the explanatory letter, this promotes fairer treatment across different sports, as the costs associated with practising various sports can vary throughout the seasons. Additionally, this approach allows employees to purchase an annual sports club membership or enables employers to pay a one-time health insurance premium for the entire year, which can be more advantageous than making quarterly payments.
The draft also aims to expand the range of health services, which the employer can reimburse tax exempt up to the limit. Following the planned changes, the employer will have the right to reimburse, tax exempt, services such as massages and those provided by qualified healthcare professionals and specialists with relevant expertise. The tax exempt threshold for goods and services provided for advertising purposes, such as promotional gifts, will increase from 10 euros to 21 euros (excluding VAT).
Payments related to catering, accommodation, transportation or entertainment of guests or business partners are currently subject to a tax exempt limit of 32 euros per calendar month. According to the draft, the corresponding limit would rise to 50 euros per calendar month.
In addition to the above, the draft also modifies the tax exempt thresholds for providing meals to ship and aircraft crews, employee accommodations, and souvenirs donated by non-profit organizations.
The changes are planned to enter into force on January 1, 2025. The draft materials are available in Estonian here.
Author: Martin Tois