The current maximum tax-free cap on daily allowances for business trips abroad no longer meets the needs of entrepreneurs and employees

The Estonian Chamber of Commerce and Industry approached the Ministry of Finance with a proposal to increase the tax-free limit on daily allowances for business trips abroad, which has remained unchanged since 2016.

Currently, the tax-free limit for daily allowances for business trips abroad is 50 euros for the first 15 days of a business trip abroad, but not more than 15 days per calendar month, and 32 euros per day thereafter. The Chamber of Commerce asks for an increase in the tax-free limit on daily allowances to 75 euros for the first 15 days of a business trip abroad, but not more than 15 days per calendar month, and to 40 euros for each subsequent day. The Estonian Chamber of Commerce and Industry explains that growth at this rate takes into account both the current inflation and the forecast and is based on the current practice, where the limit is relatively rarely raised.

Finland, for example, updates the tax-free limits for daily allowances each year, which gives companies the assurance that the daily allowance limits are in line with the actual price level. In Finland, the maximum daily allowance in 2024 is, for example, 75 euros for trips to Germany and 64 euros for trips to Sweden. In 2023, the thresholds for the same countries were 71 euros and 66 euros, respectively. In addition, in 2024 in Sweden, for example, the maximum daily allowance is 70.44 euros for trips to Germany (63.22 euros in 2023) and 83.47 euros for trips to Finland (69.21 euros in 2023). Thus, for Estonian employers and employees, the tax-free limit on daily allowances for foreign trips is currently lower for the above countries than in Finland or Sweden and would remain lower even if the proposal below to increase the current tax-free limit by the inflation rate of the European Union in recent years is taken into account.

“During the period 2016-2023, inflation in Estonia has been 48.6%. Between years 2016 and 2022, the growth of the consumer price index in the European Union has been 18.82%, but taking into account the projected change in the consumer price index for 2023, the price increase in the European Union has certainly been over 20% and may even reach 25%. As a result of the above, Estonian employees have to pay the costs exceeding the tax-free limit of daily subsistence allowance from their wages or the Estonian employer has to pay the actual costs of income and social tax from the part of the daily subsistence allowance exceeding the tax-free limit,” stated Mait Palts, Director General of the Estonian Chamber of Commerce and Industry, pointing out that neither solution is in line with the objective of the tax-free limit of daily subsistence allowance and that this puts Estonian entrepreneurs in a worse position compared to entrepreneurs from other Member States. 

Since the tax-free cap for daily allowances for foreign trips has not been raised since 2016, but inflation has been very high during this period, the current maximum tax-free allowance for foreign missions is no longer appropriate. The costs associated with business trips abroad have increased rapidly and very much in eight years, but the tax-free daily allowance limit has not increased during this period and it no longer covers the costs associated with the business trips. Consequently, the Chamber of Commerce seeks to improve the conditions of competition between undertakings and, in its appeal, requested an increase in the tax-free limit on daily allowances for foreign trips.