Company donations in Estonia can have three tax outcomes: fully exempt, partly taxable or taxable in full. A founder wants the company to support a local charity with EUR 1,500. The transfer itself is easy; the tax answer is not. The recipient's status, the company's payroll and its last completed financial year decide the result. Calling the payment a marketing expense cannot replace those tests.
In my Estonian accounting work I first check the recipient in EMTA's list, then compare the two annual ceilings using the company's actual records. This guide shows that calculation and the monthly TSD entry. It concerns a company's donation, not promotional gifts to customers, which have different tests.
Verify the recipient before transferring money
The exemption in § 49 of the Income Tax Act depends on the recipient, not simply on a charitable purpose. Check the legal name and registry code against EMTA’s current list of tax-incentive associations at the time of payment and save evidence of the match. A nonprofit can do valuable work without being on that list.
A donation to an unlisted private association does not qualify for the ordinary 3% or 10% exemption. EMTA’s donation guidance also recognises certain qualifying associations in another EEA state, but their status requires evidence. Do not assume that a foreign charity automatically qualifies. Document the board’s decision, payment purpose and recipient’s acknowledgment alongside the bank transfer.
Choose one annual ceiling and calculate the excess
The company chooses either 3% of payments subject to individually registered social tax made in the same calendar year, or 10% of its profit from the last financial year ended by 1 January of that calendar year. It cannot add the ceilings together or switch between them to double the annual allowance. Include earlier qualifying gifts and donations in the same year's total.
Suppose relevant 2026 payments total EUR 20,000 and the qualifying prior-year profit is EUR 12,000. The ceilings are EUR 600 and EUR 1,200 respectively. If there were no earlier qualifying donations, a EUR 1,500 cash donation to a listed association leaves EUR 300 above the better EUR 1,200 ceiling. Income tax is EUR 300 × 22/78 = EUR 84.62. With an unlisted recipient the ordinary exemption would not apply to that transfer.
| 2026 example | 3% payroll route | 10% prior-profit route |
|---|---|---|
| Basis | EUR 20,000 relevant payments | EUR 12,000 qualifying profit |
| Annual tax-free ceiling | EUR 600 | EUR 1,200 |
| EUR 1,500 donation, no earlier gifts | EUR 900 excess | EUR 300 excess |
| Tax at 22/78 | EUR 253.85 | EUR 84.62 |
Record the gift in TSD Annex 5 even when tax is zero
The tax period is the month in which the donation is made. A resident company's gifts, donations and reception expenses belong in TSD Annex 5; EMTA requires the data even if the ceiling covers the whole donation. File the return and pay any tax by the 10th of the following month. The recipient's own INF 4 and INF 9 reporting is not a substitute for the donor's Annex 5.
Keep a running yearly ledger of listed-recipient gifts and donations, the chosen ceiling, relevant social-taxable payments, prior-profit figure and previously reported Annex 5 amounts. A later donation can use up remaining capacity, so the tax result must be recalculated with the cumulative total rather than treating each payment as a fresh allowance.
Keep cash donations separate from donated goods
A bank transfer of money does not carry an input-VAT invoice or a free-transfer VAT calculation. If the company gives goods instead, the income-tax ceiling is only one part of the answer: review whether input VAT was deducted on the goods and whether their free transfer creates taxable supply under VAT rules. Do not carry the cash example's VAT conclusion over to inventory or equipment.
An employee's personal fundraiser reimbursed by the company can have a different recipient and fringe-benefit treatment. Similarly, a customer gift or sponsorship with advertising services is not automatically a charitable donation. Classify the actual transaction before posting it. For the EUR 1,500 example, the minimum file is the list check, approval, transfer, profit/payroll calculation and Annex 5 reconciliation.
I ask for the recipient's registry code before approving a donation. A bank statement proves payment, not eligibility. The second check is the year-to-date allowance: the same EUR 1,500 transfer can have a very different tax result after earlier donations have used up the ceiling.
A company donation has a clean sequence: confirm the recipient, select one annual ceiling, total the year's qualifying donations, tax the excess and report Annex 5. The example is deliberately a cash gift; donated goods need a separate VAT review.
If your company has several recipients or a changing financial year, send the transfer details and records through the AccRes contact form before TSD is filed.