How does mileage allowance work?
Mileage allowance refers to the state-subsidised reimbursement an employee can claim from their employer, to cover any fuel or repair costs incurred while using a private vehicle for business reasons.It’s a win-win situation for both employer and employee bank accounts: workers don’t have to foot the bill for travel expenses, and businesses can make the most of tax deductions while supporting their employees on business trips.Each European country covers these costs at different rates, and it is the responsibility of the employer to cover these expenses, so to ensure you’re keeping compliant, it’s important for employers and employees to be familiar with Estonia-specific regulations.Now we’ve established the basics, let’s move onto the Estonian rates.
What are the mileage allowance rates in Estonia in 2025?
The Estonian system is straightforward, and similar to the other two Baltic states, Lithuania and Latvia. When driving your own car for business use, the tax-exempt mileage allowance is 0.30€ / km.These rates are set out in the Business Trip Regulation no. 10, which explains the formalisation of business travel and reimbursement of tax-exempt expenses.
Fringe benefits in Estonia
It’s important to remember that, as set out on the Estonian Tax and Customs Board, employers pay income tax on fringe benefits granted to employees, as per Article 1 of Section 48 of the Income Tax Act.Fringe benefits are additions to compensation that companies offer their employees, for example a company car, extra paid leave, transport costs, or a gym membership. Put simply, a fringe benefit is a part of salary or wages that is usually paid in a non-monetary form. There is, however, an exception to the rule—individual cash payments are also treated as a fringe benefit, and these cases are precisely specified in the Income Tax Act.In Estonia, fringe benefits i.e. benefits provided by the employer to the employee are subject to income tax at a rate of 20/80 and social tax at a rate of 33%. This rule is based on Clause 7 of Subsection 1 of Section 2 of the Social Tax Act, while social tax is paid on fringe benefits within the meaning of the Income Tax Act, expressed in monetary terms, and on income tax payable on fringe benefits.
Per diems in Estonia for 2025
In addition to business mileage remuneration, employers can also pay their employees a daily (per diem) travel allowance covering costs including accommodation and meals. In Estonia, tax-free per diems for business travel abroad range from €22.37 to €50 per day, with a maximum of €50 for the first 15 days, and €32 per day thereafter. Depending on the length of the trip, companies usually pay €32 per day from the start.In order to count as a full travel day, the journey must begin before 9pm. Per diems are paid for return days ending after 3am. The Estonian tax administration does not specify how employer-provided meals affect per diems. However, commonly, a 15% deduction is made for one meal and a 30% deduction for two meals.In Estonia, an employer can send an employee to perform work duties outside the place of work specified in the employment contract for up to 30 days. After this time, the employee’s consent is required. However, it’s worth noting that a pregnant woman, or an employee raising a child under the age of three or a child with a disability may be sent on a business trip only with the employee’s consent.You can find out more about sending employees on business trips in the Employment Contracts Act.
What is not included in the mileage allowance?
In Estonia these journeys must be exclusively for business purposes, but can range from trade fairs to client meetings to conferences.It is not considered a business trip, and no compensations or daily allowances are paid as established by the Business Trip Regulation if the employee makes trips between the place of residence and the place specified in the employment contract.
How to file a mileage reimbursement claim in Estonia
Employees have the right to demand reimbursement for business trip costs under Section 628 of the Law of Obligations Act. Reimbursement cannot be deducted from wages. For international trips, employees can claim a daily allowance at least at the minimum rate unless a higher rate is agreed upon (Section 40 of the Employment Contracts Act).Employees can demand compensation for trip expenses within a reasonable time before departure and may refuse the trip if the employer fails to make an advance payment in time. If you’re thinking that "reasonable time" isn’t very clear, you’re right. It’s an undefined legal concept, but is typically based on the principle that the employer's advance payment should reach the employee by the time the employee needs to buy tickets, exchange money, etc.
Streamline travel expenses with TravelPerk's business travel management platform
There we have it, an A to E-stonia guide for mileage allowance in Estonia. It might seem like a faff, but it can be made easy—one way is to connect your expense management solution to a specialised business travel management platform, like TravelPerk.Whether you’re an entrepreneur with a brand-new startup or a travel manager for a corporate company, you can save significant time and money by keeping track of employee movements and travel costs in one place.Better still, you can sync up with TravelPerk with a selection of third-party integrations from Divvy to Expensify, integrating seamlessly into your company’s existing tech stack in a move that takes seconds and requires no custom code. You’ll be free to focus on the business task at hand—leaving the faff to us.
Frequently asked questions about mileage allowance in Estonia
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