Taxation of employees of online platforms becomes law

A Bolt food courier in Tallinn.
A Bolt food courier in Tallinn. Source: Ken Mürk/ERR

It will be now codified in law that if an employee on an online platform is not a sole proprietor, the platform will be required to pay the employee's labor taxes. According to the Ministry of Finance, platforms have complied with this requirement since last year, so the state makes this status quo official.

"The current tax law adjustments will have no effect on online platforms and their employees, as their activities already comply with the law. With this legislation, we expect to prevent a recurrence of the situation that existed a few years ago, when there were multiple interpretations of the tax obligations of the employees of online platforms," Erle Kõomets, head of the tax and customs policy department of the ministry, said.

"Today, the platforms generally require service providers to select for entrepreneurial status, to either have a business account, be self-employed (FIE), or have a limited liability company (OÜ). This effectively resolves the issue," Kõomets said.

If, however, an ordinary natural person (who is not the owner of a business account, a self-employed person, or operating through a limited liability company) provides a service through the app and receives payment for the service, then the app owner, i.e. the service intermediary, is required to declare and pay labor taxes.

The state does not know as to whether or not all platform employees are independent contractors. "The Tax and Customs Board keeps track of this. And the law that went into effect at the start of this year regarding the information obligations of platforms—that platforms must retain and collect information on which service providers receive revenue through the platform—is very helpful in this regard. In January 2024, they will be obliged to provide this information to the state," Kõomets said.

The Ministry of Finance has said that there are no plans for greater regulation of platform employees at this time, preferring to maintain the current system.

"If we were to force all platform workers into employment, it would not be good in the sense that it would reduce the flexibility that the platform economy genuinely has today. Because, in reality, many people do this in addition to their primary occupation. We would prefer not to see such a formal employment arrangement there," Kõomets said.

Trade unions argue that if a person is employed, the actual employment relationship should also be formalized in this manner for the sake of equal competition, the person's social protections, and the state's tax revenue.

"When people have a choice regarding the amount of taxes they pay, they usually pay less rather than more. On the one hand, the more accessible tax evasion becomes, the greater the problem gets.On the other hand, the tax authorities also play a significant role in assessing these tax exemptions. Now that tax vulnerabilities have been mapped relatively accurately, we should start closing them," Jaan-Hendrik Toomel, the head of the Estonian Trade Union Confederation (EAKL), said.

Bolt, Wolt and Fudy were unwilling to discuss the change with ERR on camera.

The country is also planning another tax reform as well. "If a natural person provides a service to another natural person, i.e., if a person hires a service provider such as a builder or a caregiver, the purchaser of the service is required by law to account for social tax and register the service provider as an employee. It's actually a fairly meaningless provision, given that life does not adhere to it and tax authorities lack the resources to investigate these cases. So what we are doing is that the obligation is now transferred from the purchaser to the provider," Kõomets said.


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Editor: Mari Peegel, Merili Nael, Kristina Kersa

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