Published date: July 7, 2021. 20:51
Generally, a company is free to decide on costs necessary for carrying out its business. However, for certain types of costs, the law limits the extent to which these can be made without incurring a tax cost.
Costs incurred for entertaining business guests and partners
A portion of expenses related to entertaining or hosting business and cooperation partners can be made tax-exempt. Entertaining or hosting is generally understood to include catering, accommodation, transportation and entertainment of guests and business partners, and is therefore partially related to business activities.
By law, a fixed sum of EUR 32 per month plus 2% of the payments which have been subject to social tax (i.e. the salary fund of the company) in the relevant month are exempt. Amounts above this threshold, which is different for each company, are taxed with CIT. The tax return “TSD” Annex 5 keeps track of the balance automatically.
Note that, if employees or management board members take part in these events, the costs related to them are not deductible and instead should be taxed as fringe benefits.
Gifts and donations
Gifts must have a value that can be expressed in monetary terms, i.e. with a clear consumable value for the recipient. Advertising printouts, product samples or presents with a value of less than EUR 10 (excluding VAT) are not taxed as gifts since they hold little consumable value. Anything that is worth more than EUR 10 is taxed at 20/80 CIT, which applies to the full amount.
With respect to charitable donations, it is possible to make tax-exempt donations to non-profit organizations and foundations that have been verified and put on a list managed by the tax authorities. The list of such associations can be found here: https://www.emta.ee/eng/business-client/registration-business/association-list-associations-benefiting-income-tax-incentives