For companies within the same group, it is common practice to organize joint events, whether they are entertainment-focused summer days or business-oriented seminars. However, it’s important to remember that such events may trigger a tax liability.
What is a fringe benefit?
A fringe benefit means that an employee receives an additional perk from the employer – for example, attending an event, receiving a gift, etc. The employee does not pay the tax themselves; paying it is the employer’s responsibility. In Estonia, fringe benefits are subject to income tax and social tax.
What situations can arise?
👉 If all participants are from Estonian companies – each employer pays the taxes for their own employees.
👉 If an Estonian employee receives a benefit from a foreign company – the tax liability depends on whether the tax has already been paid abroad.
👉 If a foreign employee receives a benefit in Estonia – this is treated as guest entertainment costs and is subject to income tax only.
What should the employer do?
- Keep a record of participant lists and invoices.
- When necessary, request confirmation from a foreign partner that taxes have already been paid.
- Report the expenses correctly (Annex 4 or 5 of the TSD declaration).
Corporate events are valuable and necessary, but tax liabilities should never come as a surprise. When the rules are clear and the documentation is in order, everything will run smoothly.
Got questions? Our team is ready to help and share useful tips!
Contact us by email at info@ee.gt.com or by phone at +372 626 0500.
