These benefits are perks provided by employers that, within certain limits, do not require payment of income and social security taxes. 

Arto Aas, head of the Estonian Employers' Confederation (Tööandjate Keskliit), requested the ministry review the existing rules as some caps have not changed for almost a decade. 

For example, an employer can pay an employee tax-free compensation for the personal use of their car at 30 cents per kilometer up to €335 per month and tax-free up to €50 per day for the first 15 days of a foreign business trip, and then €32 per day after.

Erle Kõomets, head of the Ministry of Finance's Tax and Customs Policy Department, told the union that the ministry plans to change the limits for car compensation and business trips because they have not kept up with the cost of living.

The proposals have now been sent to the Minister of Finance Mart Võrklaev (Reform). Amendments to the Income Tax Act are being drafted and Kõomets said there is hope they can be implemented at the start of 2025.

Employer's Vehicle

Under the current law, a vehicle owned by the employer can be used for private trips, subject to a benefit tax — typically €1.96 per kilowatt of engine power per month. Employers believe this rate could decrease due to the implementation of a car tax.

Kõomets said the rate should instead be raised, as the value of the benefit has increased over time. Once the new car tax conditions are established, Kõomets said new rates could be set.

"Unfortunately I have to mention that lowering the price of special tax allowances is not part of our current plans, rather only moderating a possible increase. The principle remains that the benefit offered by the employer to the employee should be adequately priced to avoid substitution of salary income by more tax-efficient bonuses," she said.

Health and Sport

In response to a proposal to raise the tax-free limit for covering health and sports expenses from €400 to €600 per year, expand the list of eligible services, and change the accounting from quarterly to annual, the ministry said there are no plans to raise the limit.

"Tight public finances mean that changes that reduce budget revenues will only be considered if the benefits are as broad as possible. Statistics on health care costs still show that only a small proportion of employers offer such a salary benefit to their employees, and even of these, a significant proportion remain below the limit," Kõomets wrote.

"This is partly due to an overly narrow list, and it is a problem that we are trying to mitigate. The plan is to incorporate the proposals on car allowances and mission limits in a single draft," she added.

Employer Pension

Finally, the Employers' Confederation asked the ministry for a tax exemption on contributions made by employers to employees' third-pillar pensions. The ministry said analysis is underway for the future development of the employer pension scheme.

"The aim is to have a coherent approach – we certainly do not want to offer some pension products significantly more favorable tax conditions than others, but once again the decision will be influenced by all sorts of factors, in particular, whether employers' greater involvement in financing pensions outweighs less social tax," Kõomets stated.

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