Which employee benefits can you give tax-free in Lithuania, Latvia and Estonia? The answer differs a lot between the three countries, even for something as simple as a gift. This guide collects the questions HR teams most often ask their accountants, with the limits that apply in 2026.
The rules below reflect the law as of October 2026. Latvia is preparing its 2027 budget and further amendments to its personal income tax law, so some limits may change from 1 January 2027. We update this page when they do. This is general information, not tax advice: confirm your specific case with your accountant.
At a glance
- Gifts to employees. Lithuania: tax-free up to €200 per employee per year. Latvia: up to €100 per year. Estonia: taxed from the first euro.
- Health insurance. Lithuania: up to €350 per employee per year. Latvia: health, life and accident insurance together up to 10% of gross pay, but no more than €750 per year. Estonia: health insurance premiums count towards the €400 health promotion limit.
- Sport and health services. Estonia: up to €400 per employee per year for regular sport, massage and licensed health services. Lithuania and Latvia: no tax-free sport allowance, so gym memberships and sports cards are taxed like salary.
- Meals, medical costs and transport. Latvia: tax-free under a collective agreement, within a company-wide cap of €700 per average employee per year. Lithuania: employer-paid public transport tickets for the commute are tax-free.
- Remote work. Latvia: up to €40 per month for a full-time employee.
- Pensions. Lithuania: employer pension contributions, long-term life insurance and health insurance are tax-free together up to 25% of the employee's employment income.
Lithuania
In Lithuania, benefits an employer gives its employees are income in kind and are taxed like salary, unless the Personal Income Tax Act lists them as non-taxable income (Article 17). The exemptions that matter most for employee benefits are:
- Gifts and prizes: up to €200 per employee per calendar year in total (Article 17(1)(39)). Only the amount above €200 is taxed.
- Commuting by public transport: train or public road transport tickets the employer pays for travel between home and work (Article 17(1)(39)).
- Voluntary health insurance: employer-paid premiums up to €350 per employee per year, where the insurance pays for healthcare services (Article 17(1)(14¹)).
- Pension contributions and long-term life insurance: employer contributions to a pension fund and qualifying long-term life insurance premiums are tax-free together with the health insurance above, up to 25% of the employee's employment income for the year.
Social insurance (Sodra) contributions follow their own rules, so check them with your accountant.
Latvia
In Latvia, benefits from an employer are generally taxed like salary, with personal income tax and state social insurance contributions, unless the law on personal income tax exempts them. Several limits were raised in 2024 and 2025:
- Gifts: up to €100 per employee per tax year since 1 January 2025 (previously €15). Gift cards count as gifts.
- Birth and funeral benefits: up to €500 each since 2025.
- Benefits under a collective agreement: meals, medical treatment, relocation, accommodation and transport set out in a collective agreement are free of personal income tax up to a company-wide cap: €700 multiplied by the average number of employees in the year. The total must also stay within 5% of the employer's annual gross payroll, and the employer must keep the supporting documents. Until 2024 the limit was €480 per employee per year, for meals and medical costs only. A Cabinet regulation adopted in December 2025 lists exactly which expenses qualify. If the cap is exceeded, the excess is taxed with corporate income tax rather than as the employee's income.
- Insurance: health, life (without savings) and accident insurance premiums are tax-free up to 10% of the employee's gross pay for the year, but no more than €750 per year in total (since 2024).
- Remote work: up to €40 per month for a full-time employee (since 2024), if remote work and the costs the employer covers are set out in the employment contract or an employer's order. The amount is proportional to workload and the number of remote days, and does not apply during absences longer than 30 days.
- Higher education: study fees the employer pays at accredited institutions in Latvia, the EU or the EEA are not taxed as salary if the studies give skills the employer needs (since 2024).
- Team events and staff wellbeing: for corporate income tax, spending on staff wellbeing measures such as team events, together with representation costs, is not treated as a non-business expense up to 5% of the previous year's gross payroll. The measures should be available to all employees and described in the company's accounting policy.
Estonia
In Estonia, almost every benefit an employer gives an employee is a fringe benefit (erisoodustus). The employer pays income tax at 22/78 and social tax at 33% on it and declares it monthly on form TSD annex 4. The main exception is health promotion:
- Sport and health: since 1 January 2025, up to €400 per employee per calendar year, VAT included, for regular sport (sports clubs, swimming pools, public sports events), massage, licensed healthcare services, nutrition counselling and health insurance premiums. The benefit must be available to all employees, and the tax-free amounts are declared once a year on form INF 14 by 1 February. Sports clothing, equipment and one-off events do not qualify.
- Gifts: there is no tax-free limit for gifts to employees. A €30 gift card costs the employer about €51 with taxes.
More on our sports and health compensation page.
Frequently asked questions
Which employee benefits are tax-free in all three Baltic countries?
None works the same way everywhere. Gifts are tax-free up to €200 in Lithuania and €100 in Latvia but taxed in Estonia. Health is favoured in all three, but in different forms: health insurance up to €350 in Lithuania, insurance up to €750 in Latvia, and sport and health services up to €400 in Estonia. Companies with staff in several Baltic countries usually set separate limits per country.
Are sports benefits such as gym memberships tax-free?
Only in Estonia, within the €400 annual health promotion limit. Lithuania and Latvia have no tax-free sport allowance, so a gym membership or sports card paid by the employer is taxed like salary. That is why many employers there choose health insurance instead, which has its own tax-free limit.
Are gift cards taxed like other gifts?
Yes. In all three countries a gift card given to an employee counts as a gift, just like an item or a voucher for a service, so the same limits apply.
Is the tax-free limit per employee or per company?
Mostly per employee per year: gifts and insurance in Lithuania and Latvia, and the €400 health promotion limit in Estonia. The exception is the Latvian collective agreement exemption, which is a company-wide cap of €700 per average employee, so one employee can receive more than another as long as the company total stays within the cap.
Do we need a collective agreement in Latvia?
Only for the exemption on meals, medical treatment, relocation, accommodation and transport. Gifts and insurance do not need one, and the remote work compensation needs the employment contract or an employer's order instead.
What happens if we go over a limit?
Usually only the amount above the limit is taxed: as salary in Lithuania and Latvia, and as a fringe benefit in Estonia. In Latvia, if the collective agreement cap is exceeded, the excess is taxed with corporate income tax instead.
Can we give a benefit only to some employees?
For the Estonian €400 health promotion exemption, the benefit must be available to all employees. In Latvia, staff wellbeing measures should be available to all employees to qualify for the corporate income tax treatment. For other benefits, check with your accountant how different rules for different groups affect the tax treatment.
How much remote work compensation is tax-free in Latvia?
Up to €40 per month for a full-time employee, if remote work and the compensated costs are set out in the employment contract or an employer's order. For part-time work or partly remote work, the amount is reduced proportionally.
Is training paid by the employer taxable?
Training needed for the job is generally treated as a business cost rather than a benefit in all three countries. In Latvia, employer-paid higher education is also not taxed as salary when the studies give skills the employer needs. Confirm courses that are not clearly work-related with your accountant.
How is a flexible benefits budget taxed?
It depends on what the employee chooses. A budget is tax-free only to the extent that it is spent on benefits within the limits above, for example health insurance in Lithuania or sport and health services in Estonia. Choices outside those categories are taxed like salary or as a fringe benefit.
How does MELP help?
In MELP you set budgets and limits per country, per group and per benefit type, so each employee chooses within the rules that apply to them. In Estonia, MELP also prepares the data for the annual INF 14 declaration. See MELP employee benefits.
