Tax-Free Car Reimbursement in Estonia

Estonian companies can reimburse employees for the use of a personal vehicle for work-related purposes on a tax-free basis. The current limit is up to €0.50 per kilometre, but no more than €550 per month per employer. This option applies to employees, officials, and board members who use their personal car for work purposes. Two key documents are required to pay the reimbursement: a written employer order authorising the payment, and a detailed mileage log. The mileage log must include the date, starting point and destination, purpose of the trip, and kilometres driven. An incomplete mileage log is one of the most common reasons why a reimbursement is reclassified as a fringe benefit during a tax audit. If the reimbursement exceeds €550 per month, the excess is treated as a fringe benefit, for which the employer must pay 22% income tax and 33% social tax. It is therefore important to monitor expenses monthly and maintain accurate records. Proper reimbursement of driving costs is beneficial for both employer and employee — the employee receives compensation for work-related car use, and the employer can correctly reflect the costs in their accounting. A professional accountant can help set up a system that ensures compliance with all requirements.