Although traveling has decreased significantly during the corona period, we hope that at some point it will be a normal part of working life again. In order to not forget what to keep in mind when traveling for business, here is a quick overview of this topic. Bear in mind, legal part of this blog post is based on Estonian laws.
Daily allowance in Estonia.
The concept of daily allowance is linked to traveling abroad and is meant to compensate the worker for meals and other daily expenses. The daily allowance is usually not provided for travels inside the home country. That is, if the company decides to pay daily allowances for travel inside the home country, all payroll taxes are paid on them. The logic behind this is that people have to eat anyway, and there is no significant difference between food prices in Pärnu and Tallinn.
A business trip abroad is more difficult for an employee. Going to a strange place, a second language speaking environment, no usual safety net, and usual shops/restaurants, etc. A daily allowance for a business trip abroad is meant to compensate for both the price difference and other inconveniences (absence from family and friends). The minimum allowance to be paid to an employee per day is 22.37 euros in Estonia. But it may be more. It is allowed to pay up to 50 euros tax-free for the first 15 days of a business trip, but not more than 15 days per calendar month. Up to 32 euros can be paid tax-free for the remaining days. Again, you can pay more, but in this case, you have to pay taxes on the rest of the amount, similar to your salary.
It is especially worth noting that 50 euros can only be paid for the FIRST 15 days in one month. For example, if the trip lasts 45 days, the higher daily allowance can only be paid for the first 15 days. Also, if there are several missions in one month, it must be ensured that no higher daily allowance is paid for more than 15 days in one month.
When paying daily allowances, you must observe the times and location. The place must be located at least 50 kilometers from the workplace in the home country (daily allowance cannot be paid when working from Valga to Valka). It is also important that the departure starts before 21.00 and the return takes place after 03.00. If you are outside these limits, you cannot pay the daily allowance. The times are calculated according to the actual arrival/departure, i.e. if the plane was supposed to take off at 20.40, but actually only left at 21.30, no daily allowance can be paid for that day. It is the employer's responsibility to prove the start and end time of the travel, if necessary.
How to start a business travel
The employer has the right to send an employee on a business trip without the consent of the employee (except for a pregnant employee, an employee with an under 3-year-old child, or with a disabled child) in Estonia. For longer periods or for the above-mentioned employees, the employee's consent must first be obtained. The notice period for the travel is not directly regulated, but there must be enough time to arrange accommodation, transport and for the worker to reorganize his life.
If the employee has been notified of the travel, it is equally important to formalize the travel decision. It is a free-form document that identifies who, where, and for what purpose is sent. The travel decision is a document on the basis of which the employer proves that he is sending the employee on travel and on the basis of which the tax benefit can also be used. In addition, since daily allowances are generally paid in advance, the accounting officer can also calculate the allowances and make the payments.
Expenditure prior to the trip
Before going on a business trip, you can plan your accommodation and maybe also transport (tickets) in advance. If these expenses are paid by the staff member himself, he shall be entitled to an advance payment. The employer can also pay the expenses immediately. Most companies prefer to buy accommodation and tickets themselves because in this case it is easier for the employee to go on a business trip and less money needs to be moved.
Expenditure incurred during the trip
At the place of secondment, the employee is expected to make additional expenses, and if the employee has not been given a company card, these costs must first be made from their own wallet and later be reimbursed. Such expenses often include the host country's SIM card, business meetings/lunches with partners, taxi bills, gasoline receipts, etc. Proof of purchase must be kept for all expenses made.
Among other things, the purchases made on the spot and the supporting documents also prove that the travel took place. For this reason, some accountants also ask for "tickets" for airline tickets, as this proves that the trip still took place and that the employer can pay the expense without any additional taxes.
When returning from a travel, a report must be made
Once the travel has been completed and the employee has returned to the office, they must submit a travel report in accordance with the rules established by the company in order to receive a refund for the expenses made. The travel report shall indicate the destination of the travel, duration, and purpose. It also has to include all expense documents (from the air ticket bill to the taxi check) and indicates which expenses were made by the employee with personal money and which were paid from the company's funds. According to the travel report, the expenses made by the employee can be reimbursed. If the employee was paid in advance before the travel, the money cannot be reimbursed a second time, but the documents must be submitted.
How to make a travel report with CostPocket
Even before you go on a business trip, you can use the CostPocket app to prepare a draft of a travel report by adding a name, destination, dates, and a comment to the report (comments can include the purpose of the business trip, such as a meeting with a partner). Then it is very easy to take a photo of all the expenses made during the posting and add them to the report automatically because then there is no risk that something will be lost or accidentally overlooked. It is also a good idea to keep track of all your expenses.
When the trip is over, review the report again and ensure that nothing was forgotten. If everything is in order, you can confirm the report and send it directly to accounting (the whole report goes to the accounting program with all the individual documents at once) or you can send the report to yourself by e-mail and then forward it to the accountant.
If you have any questions or comments on this topic, write to us and we will answer!