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COVID-19 in Estonia: Requesting payment of tax arrears in instalments is still important

2020-03-20

While the Ministry of Finance has announced that any interest on tax arrears for the months of March and April will be suspended and no compulsory execution arising from tax arrears shall take place during the emergency situation, a business with solvency difficulties should nevertheless request for the payment of tax arrears in instalments.

The interest relief proposed by the government and subsequent reduction of interests as of May does not preclude the incurrence of tax arrears during the emergency situation. Businesses still need to file timely tax returns and pay the tax as required. If paying all taxes is not possible due to lack of funds, it would be advisable to file a request for the payment of tax arrears in instalments to prevent any further problems.

It has been announced by the Ministry of Finance that the tax authority will employ a flexible approach to debt proceedings and shall reschedule payments over a period of up to 18 months if the tax arrears have arisen due to the liquidity problems caused by the spread of coronavirus disease and the loss of income within this period. Requests for the payment of tax arrears in instalments should be filed after the tax declaration at the taxpayer’s own request. With respect to insignificant tax amounts (up to 20,000 euros) a payment schedule could be automatically generated online at e-Tax / e-Customs Board.

The tax arrears that have not been scheduled for payments in instalments could cause forfeiture of important advantages. Even in the absence of interest expenses and compulsory execution for tax due, tax arrears could bring about revocation of activity licenses or prohibit participation in public procurement. Furthermore, a tax debt may discourage business partners and further reduce the number of any future orders. Information on tax arrears is public and may arise upon applying due diligence measures even though the tax authority has stopped disclosing this information on its website.