Supreme Court: Compulsory enforcement of tax arrears to expire in 5 years ({{commentsTotal}})

Chief Justice Priit Pikamäe.
Chief Justice Priit Pikamäe. Source: Heini Heinlaid/ERR

A decision by the Supreme Court of Estonia has amended the current procedure for the recovery of tax arrears. According to the amended procedure, the compulsory enforcement of tax arrears can no longer take more than five years.

According to previous procedure, the compulsory enforcement of tax arrears, ie the recovery of debt, essentially did not expire. With a regulation in October, the Supreme Court has now significantly curtailed the expiry period. The new procedure stipulates that tax arrears under compulsory enforcement are deemed expired after five years from the 1 January following the year of the initiation of execution proceedings, the Estonian Tax and Customs Board (MTA) said.

Airi Jansen-Uueda, manager of the Manager of Special Proceedings Area of the MTA's Legal Department, said that until now, the tax administrator had considered opportunities for the compulsory enforcement of tax arrears essentially limitless in timeframe when initiating execution proceedings. "This meant that when the MTA had sent a tax claim to the bailiff, the expiration was suspended and a new five-year expiration of the compulsory enforcement began only after the end of the execution proceeding," she explained.

The Supreme Court's October decision retroactively concerns all valid tax claims which had been forwarded by the MTA to the bailiff before 1 January 2013. According to preliminary analysis, there are approximately 2,500 such tax claims in total, over 10% of which pertain to companies and the rest to private persons. The claims are valued at a total of €9.5 million and consist primarily of so-called "old debts," the recovery of which has previously also been assessed as unlikely.

The Supreme Court's decision did not affect any other principles concerning the compulsory enforcement of claims, however.

"The change in practice will not affect our current recovery measures too much," Jansen-Uueda said. "In order to more effectively recover tax arrears, we have in recent years already intensified our activities, and the fulfillment of declared tax liabilities has been around 99.5% in recent years."

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Editor: Aili Vahtla



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