Government plans to tighten rules on OÜ private limited companies

The government will start discussing ways to limit the use of private limited companies ( (known as osaühing or OÜ) to avoid paying taxes. In the future, it is possible that in certain cases dividends will be taxed with social tax.
One way to avoid paying labor taxes is by signing a contract with an OÜ registered company instead of a normal employment contract. These are usually one-man companies that provide a service to an employer.
The Ministry of Finance wants to tighten up regulations around these companies. There are several possibilities, such as stricter conditions for granting loans.
"Consideration is also being given to partial taxation of dividends for social tax purposes in certain cases where there are questions as to whether the dividend is work or a dividend," Minister of Finance Mart Võrklaev (Reform) told "Aktuaalne kaamera".
The Social Democratic Party (SDE) proposed additional restrictions for creating OÜ companies last year during budget discussions. Chairman and Minister of the Interior Lauri Läänemets said it is necessary to fix the loopholes that allow companies to avoid taxes.
"If we see companies where a person is paid the minimum wage, but at the same time a dividend of €5,000 is paid out every month, then clearly they are not paying themselves a fair wage," Läänemets said.
The Chamber of Commerce and Industry's Mait Palts said it is impossible to reduce tax fraud to zero and each issue should be approached separately.
"I can not tell you today what needs to be changed first. I think that it should all start by first having a clear problem statement and definition. And then we'll see how we solve it and whether it makes sense at all," Palts said.
Minister of Economic Affairs Tiit Riisalo (Eesti 200) stressed the proposals are in the early stages of discussion. But entrepreneurs will also be involved in the future.
"Certainly, when these proposals take a more concrete form, which we have now started to analyze, we will consult them and I believe we will clarify the legal framework. And also in the sense that small businesses, micro-enterprises that are operating will not be harmed by these changes, but will find it easier to do their work," Riisalo told AK.
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Editor: Merili Nael, Helen Wright
Source: Aktuaalne kaamera