Estonia cuts impact of tax evasion through incorporation by EUR 210,000 in 3 months

Largely as a result of interaction between the Estonian Tax and Customs Board and entrepreneurs on the subject of incorporation, 157 more people have started to pay payroll taxes and have paid altogether 210,000 euros in such taxes in three months, the tax authority said, cites LETA/BNS.

“In connection with the decision of the Supreme Court on concealing an employment relationship we’ve got 157 new recipients of remuneration for work or remuneration for member of the management board in the period from October to December, half of them as a result of counseling by the Tax and Customs Board,” Rainer Laurits, spokesman for the tax authority, told BNS.

In total 210,000 euros in payroll taxes has been paid on these 157 persons during the three months.

“Hence many companies have revised their work arrangements and deserve recognition for it,” Laurits said.

He said that gradually the Tax and Customs Board is entering into communication also with the businesses in whose case it seems that considering economic indicators and criteria it may be necessary to become convinced together that tax matters are in order. “Most of tax money is paid voluntarily and our wish is to maintain and create that willingness by means of trustful communication,” Laurits said.

The Tax and Customs Board announced in mid-October that it intends to contact companies suspected of concealing an employment relationship to advise them on how to bring their activity into accordance with the law. It said companies not changing their practices will be subjected to a tax audit.

Incorporating in the sense of tax evasion is generally understood as a practice where, in order to avoid the payment of payroll taxes, an employment relationship between a business and an individual is concealed as a business relationship between the business and a private limited company belonging to the individual.