Employee expense reimbursement in Estonia is common when a worker pays for a cable, taxi or urgent office item with a personal card. The bank transfer back to the worker is not the evidence by itself. The accounting file must show what was bought, when, for which business task, who paid and how much the company approved. Without that trail, a genuine business purchase can become a tax correction.
In my accounting work, I separate three questions: may the company recognise the cost, may it deduct input VAT, and is any part a personal benefit. Those tests use overlapping documents but do not have identical answers. This guide gives a practical approval flow and a EUR 124 example for a VAT-registered company. Business trips, home-office allocations and car compensation have separate rules.
Build one evidence file for the transaction
Under §§ 6 and 7 of the Accounting Act, every entry must be supported by a source or summary document. The source document must allow an independent person to understand the transaction and must show at least the time, economic content and figures. Keep the seller's invoice or receipt; the employee's expense report is the internal summary and approval layer.
A useful report records the claimant, payment date, supplier, business purpose, project or cost centre, gross amount, currency, requested reimbursement and approver. Match it to the bank payment. For an online order, retain the invoice and proof of delivery, not only the card notification. Accounting documents are normally retained for seven years from the end of the relevant financial year.
Decide the business and personal parts before payment
The reimbursement exclusion in § 12(3) of the Income Tax Act applies to certified costs incurred for another person, while § 51 taxes company expenses with no compliant source document or no business connection. Write the specific purpose: ‘USB-C adapter for the client presentation room’ is stronger than ‘office expense’. Approval cannot turn private consumption into a business cost.
For a mixed purchase, reimburse only the demonstrable business share or document why another split is reasonable. If the company deliberately covers an employee's personal part, review fringe-benefit reporting in TSD Annex 4. A missing or non-compliant document and a company-level non-business expense can instead lead to Annex 6. Classify the facts before filing rather than choosing an annex from the bank description.
Run a separate invoice test for input VAT
EMTA’s input-VAT guidance requires an invoice that meets the VAT Act rules. The buyer normally needs to be the company. A store till receipt is not automatically a simplified VAT invoice merely because it shows VAT; the seller may be able to issue a proper invoice. Ask for it before month-end instead of trying to repair the document inside the expense report.
Assume an employee buys a business keyboard for EUR 124, including EUR 24 VAT, and the invoice names the company. The company reimburses EUR 124, records EUR 100 as the cost and may deduct EUR 24 input VAT if it is VAT-registered and the keyboard serves taxable business. If the proof supports the business cost but not the VAT-invoice requirements, record the approved gross cost without claiming the EUR 24 deduction.
| EUR 124 purchase | Compliant company invoice | Receipt fails VAT test |
|---|---|---|
| Cash reimbursed | EUR 124 | EUR 124 |
| Expense or asset base | EUR 100 | EUR 124 |
| Potential input VAT | EUR 24 | EUR 0 |
| Required support | Invoice, purpose, approval, payment | Receipt, purpose, approval, payment |
Close the reimbursement file before the VAT return
Set a monthly cut-off early enough to obtain corrected invoices before KMD is prepared. Reconcile the expense report total to the reimbursement, tag duplicate submissions and confirm that a company-card purchase has not also been claimed personally. When foreign currency is involved, record the conversion method and difference between the document amount and the card debit. Related topic: What Is Included in Bookkeeping for an OÜ.
If the file remains unsupported or personal, do not leave it in a suspense account indefinitely. Repayment by the individual, fringe-benefit treatment or TSD Annex 6 reporting may be needed depending on the facts. The best control is simple: no reimbursement reaches the payment batch until the evidence, business purpose, VAT decision and approval are visible together.
I review the document before the reimbursement, not after the VAT return. The expense report explains who paid and why; it does not replace the seller's evidence. Marking the VAT decision on the same file prevents a valid business cost from becoming an unsupported input-VAT claim. Related topic: What Really Drives Bookkeeping Fees in Estonia.
A clean reimbursement file connects the seller's document, business purpose, claimant, approval and bank payment. Then apply a separate VAT test and isolate any private share before closing the month. Related topic: crypto transactions in company accounting.
If your team submits expenses through email, cards and chat, use the AccRes contact form to design one monthly document flow before the next KMD deadline.