Estonia cuts impact of tax evasion through incorporation by €1.2m in 9 months (1)
Due in large part to interaction between the Estonian Tax and Customs Board and approximately 700 entrepreneurs on the subject of incorporation, more people have begun paying payroll taxes and have already paid a total of 1.2 million euros more in such taxes over the past nine months, the tax authority reported on Monday.
Following a Supreme Court decision concerning the concealment of an employment relationship, the tax authority has interacted with approximately 700 entrepreneurs in order to review their tax matters in cooperation with the authority. As a result, remuneration for work payments has increased by 2.3 million euros and labor taxes by 1.2 million euros, Tax and Customs Board PR Manager Rainer Laurits told BNS.
The tax authority has decided to launch formal audits of two companies in whose case certainty could not be obtained that their practices have been consistent with the law.
Incorporation in the tax evasion context is generally understood to be a practice wherein, in order to avoid 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.
The Tax and Customs Board announced in October 2015 that it intended to contact companies suspected of concealing employment relationships in order to advise them on how to bring their activity into accordance with the law. It also stated that businesses not changing their practices would be subjected to a tax audit.