Per diem for business trips in Estonia

What is a business trip and for how long can an employee be sent?

The employer may send the employee to perform their duties outside the place of work set in the employment contract (TLS § 21 lg 1) [5]. An employee may not be sent on a business trip for longer than 30 consecutive calendar days, unless the employer and the employee have agreed on a longer period (TLS § 21 lg 2) [5].

In some cases the employee's consent is needed:

• a pregnant employee and an employee raising a child under three or a child with a disability may be sent on a business trip only with their consent (TLS § 21 lg 3) [5];
• a minor employee may be sent on a business trip only with the prior consent of the minor and their legal representative (TLS § 21 lg 4) [5].

The Government regulation on business trip costs does not apply to compensation or daily allowances paid for journeys between the employee's home and the place of work set in the employment contract (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 1 lg 3) [6].

Which costs must the employer compensate?

The employee may claim from the employer compensation of travel and accommodation costs of the business trip and of other reasonable costs of performing the task (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 1) [4]. As examples, the regulation names costs related to buying tickets, travel insurance, visa processing, baggage transport and exchange rate differences (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 1) [4].

• Documents. All costs related to a business trip are compensated on the basis of a document proving the cost (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 2) [4].
• Employer's decision. To compensate costs and pay the daily allowance, the employer makes a decision expressed in writing; the document on which the payment is based states the destination, duration and task of the trip and the rates of the costs to be compensated and of the daily allowance (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 3) [4].
• Foreign currency. Costs incurred in a foreign currency are compensated in the currency in circulation in Estonia, at the European Central Bank rate shown on the cost document or valid on the working day following the day of the trip, or based on the costs actually incurred (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 5) [4].
• Not out of salary. An agreement to compensate costs out of the employee's wages is void (TLS § 40 lg 1) [1].

The employee may demand compensation of the expected costs within a reasonable time before the trip begins, and may refuse the trip if the employer has not made an advance payment within a reasonable time (TLS § 40 lg 4) [1]. According to the Supreme Court, this right also applies to the daily allowance (Supreme Court (Riigikohus) judgment 2-19-9129/80) [7].

How much is the daily allowance abroad and when is it paid?

On a trip abroad the employee may claim a daily allowance on the conditions and at the minimum rate set by a Government regulation, unless the parties have agreed on a higher amount (TLS § 40 lg 2) [1]. The minimum is 40 euros a day (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 3) [2]. The regulation sets these conditions (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 4 lg 1–4) [8]:

• the allowance is paid for time spent travelling and at the destination if the destination abroad is at least 50 kilometres from the boundary of the settlement where the place of work is;
• for the day of departure the allowance is paid if the vehicle heading abroad departs no later than 21.00, and for the day of return if the vehicle arrives after 3.00;
• if the employee leaves on another trip abroad on the day of return, the allowance is paid once for that day;
• the employer may reduce the daily allowance rate by up to 70 percent if free meals are provided to the employee at the destination.

If a third party pays the employee a daily allowance, the employer must pay at least the difference between the minimum rate and the amount paid by the third party; the employee gives the employer the third party's confirmation or confirms receipt themselves (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 5) [9]. If several employers send the employee on a trip at the same time, the employee must inform the employer of the other employer's decision and of the allowance granted; an employer who knows that another employer pays the allowance has no obligation to pay it for the same period (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 6) [10].

Are the daily allowance and cost compensation tax-free?

Income tax is not charged on the compensation of business trip costs or on the daily allowance for a trip abroad paid to an employee by the employer or by a third party on the employer's behalf (TuMS § 13 lg 3 p 1) [3]. Under the regulation, cost compensation paid under § 2 of the regulation is not taxed, nor is the daily allowance for a trip abroad within the limits set in TuMS § 13 lg 3 p 1 (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 7 lg 1) [11]. The part above the tax-free limit is taxed as a payment named in § 13 of the Income Tax Act (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 9 lg 1) [12].

If the place of work is abroad, the same payments are not taxed within the limits applicable at the place of work (TuMS § 13 lg 3 p 1¹) [3].

As for trips within Estonia: the Employment Contracts Act gives a right to a daily allowance only on a trip abroad (TLS § 40 lg 2) [1], and the Income Tax Act sets a tax-free limit only for the daily allowance for a trip abroad (TuMS § 13 lg 3 p 1) [3]. Income tax is charged on other payments arising from an employment or service relationship (TuMS § 13 lg 1) [3].

What the law says

• „Töötajal on õigus nõuda töölähetusega kaasnevate kulude hüvitamist.“ [1] (translation: the employee has the right to claim compensation of the costs of a business trip; TLS § 40 lg 2) – costs are compensated on trips within Estonia and abroad alike.
• „Välislähetuse päevaraha alammäär on 40 eurot päevas.“ [2] (translation: the minimum daily allowance for a trip abroad is 40 euros a day; Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 3) – the employer may pay less only in the cases the regulation names (a destination less than 50 kilometres away, the times of departure and return, free meals, an allowance paid by a third party or another employer, see above).
• „Välislähetuse päevaraha maksuvaba piirmäär on 75 eurot välislähetuse esimese 15 päeva kohta, kuid kõige rohkem 15 päeva kohta kalendrikuus, ja 40 eurot iga järgneva päeva kohta.“ [3] (translation: the tax-free limit of the daily allowance for a trip abroad is 75 euros for the first 15 days of the trip, but for no more than 15 days in a calendar month, and 40 euros for each following day; TuMS § 13 lg 3 p 1) – within these limits no income tax is due on the allowance.
• „Töölähetusega seotud kõik kulud hüvitatakse kulu tõendava dokumendi alusel.“ [4] (translation: all costs related to a business trip are compensated on the basis of a document proving the cost; Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 2) – keep your tickets, invoices and receipts.
• „Kokkulepe kulude hüvitamise kohta töötasu arvel on tühine.“ [1] (translation: an agreement to compensate costs out of wages is void; TLS § 40 lg 1) – trip costs cannot be covered from your salary.

What to do

1. Before the trip, check its length: without an agreement, no more than 30 consecutive calendar days (TLS § 21 lg 2) [5]. If you are pregnant or are raising a child under three or a child with a disability, you can be sent only with your consent (TLS § 21 lg 3) [5].
2. Ask the employer for a written decision stating the destination, duration, task and the rates of costs and the daily allowance (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 3) [4].
3. If needed, demand an advance payment within a reasonable time before the trip begins (TLS § 40 lg 4) [1].
4. Keep all cost documents during the trip (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 2) [4] and note the departure and arrival times: the allowance for the first and last day depends on them (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 4 lg 2) [8].
5. If the employer does not compensate the costs or pay the allowance, you can apply to the labour dispute committee (töövaidluskomisjon); this is free of state fees (TvLS § 15) [13]. According to the Supreme Court, the limitation period for a claim for the daily allowance for a trip abroad is three years (Supreme Court (Riigikohus) judgment 2-19-9129/80) [7] (TsÜS § 146 lg 1) [14].

Frequently asked questions

Is a daily allowance paid for a business trip within Estonia?

The Employment Contracts Act gives a right to claim a daily allowance on a trip abroad (TLS § 40 lg 2) [1]. On a trip within Estonia you may claim compensation of the costs of the trip (TLS § 40 lg 2) [1], such as travel and accommodation costs (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 1) [4].

Can the employer pay less than 40 euros a day?

The minimum rate is 40 euros a day (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 3) [2]. The employer may reduce the rate by up to 70 percent if free meals are provided to you at the destination (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 4 lg 4) [8]. If a third party pays you a daily allowance, the employer must pay at least the difference between the minimum rate and the amount paid by the third party (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 5) [9]. If several employers send you on a trip at the same time and an employer knows that another employer pays you the allowance, it has no obligation to pay it for the same period (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 6) [10]. No allowance is paid either if the destination abroad is less than 50 kilometres from the boundary of the settlement where the place of work is (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 4 lg 1) [8].

What if the employer pays more than the tax-free limit?

That is allowed: the parties may agree on a higher amount (TLS § 40 lg 2) [1]. The part above the tax-free limit, however, is taxed as employment income (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 9 lg 1) [12].

How long can I claim an unpaid daily allowance?

The Supreme Court held that an employee's claim for the daily allowance is subject not to the four-month limitation period but to the three-year one (Supreme Court (Riigikohus) judgment 2-19-9129/80) [7], which follows from the general rule for claims arising from transactions (TsÜS § 146 lg 1) [14]. According to the same judgment, claims for compensation of costs incurred in performing work duties have a limitation period of at least three years, and claims for the daily allowance and cost compensation fall due on payday even if the employee demanded an advance, the employer did not pay it and the employee did not refuse the trip (Supreme Court (Riigikohus) judgment 2-19-9129/80) [7].

How is the use of a private car on a business trip compensated?

The costs of using a car on a business trip are compensated under the business trip regulation or under the regulation issued on the basis of TuMS § 13 lg 3 p 2; in the first case the directly related additional costs are compensated, except repair and maintenance costs (Töölähetuse kulude hüvitiste maksmise kord ning välislähetuse päevaraha alammäär, maksmise tingimused ja kord § 2 lg 4) [4]. In the second case the tax-free limit, if a record of the journeys is kept, is 0.50 euros per kilometre, but no more than 550 euros per calendar month for each employer paying the compensation (TuMS § 13 lg 3 p 2) [3].