Before arranging an employee loan in Estonia, check whether the company is legally allowed to lend to that person. An employment contract does not remove the prohibition if the employee also sits on the company's management board. For a permitted loan, assess interest and any fringe benefit. Low interest can create a tax liability even if the principal is repaid in full.
Corrected on 5 October 2026: the previous version incorrectly presented a loan to a company's own management board member as permissible. This guide now separates the statutory prohibition from taxation of permitted employee loans.
In practice, the cleanest file connects five items: the approval, loan agreement, bank payment, interest calculation and repayment ledger. This guide follows that file from the first transfer to TSD Annex 4. The worked example uses a EUR 12,000 interest-free loan with the interest benefit assessed monthly. It concerns only an employee outside the statutory prohibitions and cannot be used as a guide to lending to the company's own board member.
Check the statutory loan prohibition before payment
Commercial Code § 159(1)(4) prohibits an OÜ from lending to its own management board member, supervisory board member or procurator. The same prohibition applies to an AS under § 281(1)(4). It still applies if the board member also works for the company under a separate employment contract.
Check the employee's ownership as well: an OÜ must not lend to an individual shareholder whose holding represents more than 5% of its share capital; for an AS, the threshold is more than 1%. Both sections also restrict loans to shareholders or members of the parent company and loans to acquire the lending company's own shares. The statutory group-company exceptions do not permit a loan to the company's own board member.
A loan transaction that breaches the prohibition is void (§ 159(4); § 281(4)). Shareholder approval, market interest or paying taxes does not cure it. The company must not secure its own board member's loan either; the rules also cover economically equivalent credit transactions (subsections 3 and 5 of both sections). If money has already been paid, repayment and any tax consequences need separate assessment.
The employee definition in Income Tax Act § 48 includes members of management and controlling bodies, but this determines the scope of taxation, not permission to lend. The interest calculation below concerns only employee loans that are outside the Commercial Code prohibitions.
The agreement should state the principal, currency, transfer date, repayment schedule, interest rate, interest calculation basis, due dates, security and what happens after a late payment. Use an actual bank transfer and a separate loan receivable account. A shareholder lending money to the company is the opposite direction and does not create this employee-loan fringe benefit.
Test the interest rate on each contractual due date
EMTA’s loan guidance compares the contractual rate with the market rate at the moment interest is due. If a comparable market rate is below twice the European Central Bank main refinancing reference, the lower supported market rate may be used. If the comparable market rate is higher, charging at least the doubled official reference prevents a fringe benefit under this safe-harbour test.
The published reference changes on 1 January and 1 July. For interest due from 1 July to 31 December 2026, the doubled benchmark is 4.80% a year (2 × 2.40%). Do not hard-code it into a multi-year schedule: save the rate and source used for every due date. If the agreement creates no interest-payment obligation during the year, the annual test is made no later than December under the statutory default rule.
- Document a comparable market rate when relying on a rate below the doubled benchmark.
- Calculate the difference only for the period and outstanding principal covered by that due date.
- Update the schedule after every repayment, drawdown or contract amendment.
Calculate the tax on a EUR 12,000 interest-free loan
Assume the company advances EUR 12,000 on 1 September 2026 to an employee outside all the prohibitions described above. The employee is not its board member, procurator or a shareholder covered by the prohibition. The agreement charges 0%, and the example assesses the interest benefit monthly. For September, the company uses the 4.80% annual benchmark and has no evidence that a lower market rate applies. The monthly fringe benefit is EUR 12,000 × 4.80% ÷ 12 = EUR 48.00.
Income tax is EUR 48.00 × 22/78 = EUR 13.54. Social tax is 33% of the benefit plus income tax: (EUR 48.00 + EUR 13.54) × 33% = EUR 20.31. Total employer tax is EUR 33.85 for that month. This follows the ordinary fringe-benefit method described in EMTA’s fringe-benefit guidance; rounding should follow the return and accounting settings.
| September 2026 calculation | Formula | Amount |
|---|---|---|
| Interest shortfall / fringe benefit | EUR 12,000 × 4.80% ÷ 12 | EUR 48.00 |
| Income tax | EUR 48.00 × 22/78 | EUR 13.54 |
| Social tax | (EUR 48.00 + EUR 13.54) × 33% | EUR 20.31 |
| Employer taxes | EUR 13.54 + EUR 20.31 | EUR 33.85 |
Link TSD Annex 4 to the loan ledger
In TSD Annex 4, code 4060 carries the taxable benefit, code 4061 the market-rate interest and code 4062 the interest calculated at the contractual rate. EMTA’s declaration example shows the same logic with a historic rate. File and pay by the 10th day of the following month. The declaration month follows the interest due date, not the date when the accountant happens to review the agreement.
Reconcile the opening principal, new drawdowns, repayments and closing principal every month. A missed repayment does not by itself turn the full principal into a fringe benefit, but a waiver or disguised transfer is a separate tax event and needs its own analysis. Close the receivable only when the bank evidence and board-approved settlement agree with the ledger.
- Update the outstanding principal and interest due for the period.
- Save the benchmark or market-rate evidence and calculate the shortfall.
- Post the fringe benefit and taxes, then complete TSD Annex 4 codes 4060–4062.
- Reconcile the following bank repayment to principal and contractual interest separately.
I first check whether the loan is permitted and which roles the borrower holds in the company. Only then do I reconcile the contract, rate evidence, calculation and TSD entry. A year-end spreadsheet cannot safely repair a loan ledger that ignored repayments and changing reference rates during the year.
First exclude a loan prohibited by law. For a permitted employee loan, agree the terms before payment, track repayments and calculate and declare any interest benefit on time. Tax accounting cannot replace the legal-permissibility check.
If your company is considering a permitted employee loan, send the borrower's role and draft terms through the AccRes contact form before the first transfer so the tax treatment can be checked.