Introduction
Complying with tax legislation is not only a duty but also an essential element of any business's reputation. In Estonia, the Tax and Customs Board (MTA) oversees adherence to tax laws, with the aim of minimizing losses of state revenue, ensuring equal conditions for competition, and protecting society from tax fraud.
Reasons Why MTA Might Initiate an Inspection
Understanding the factors that can attract MTA's attention can help prevent the unpleasant procedures of inspections:
- Employee salaries significantly below the national average. This can raise suspicions of non-payment of due taxes and contributions.
- The use of foreign labor without declaring payments. If a company has permission to use foreign workers, but payment data is missing in the TSD declarations, this will be a "red flag" for tax officials.
- Discrepancy between the volume of business and the number of employees. Companies with high turnover but without permanent employees raise suspicions of tax evasion.
- Interactions with "shell companies". If your partners are companies dubious in terms of real economic activity, this may lead to additional checks.
MTA's Methods of Operation
MTA uses two main methods of interacting with taxpayers: recommendations (non-intrusive influence) and tax control.
A recommendation involves discreet assistance and consulting. This helps the entrepreneur significantly reduce time spent communicating with tax officials during tax control and avoids future fines for mistakes made out of ignorance.
Tax control is mandatory and may include fines for violations. Therefore, it is important not only to correct past mistakes but also to strive for proper business management in the future.
How to Keep Tax Documents in Order
To minimize the risk of tax inspections, a few simple rules should be followed:
- Fill out all necessary declarations timely and correctly. Errors and delays in submitting tax reports often attract MTA's attention. It is best not to spend your own time on this, but to delegate this task to a professional accounting firm.
- Provide your accountant with all documents from the previous month on time. For example, in our company, clients are required to hand over documents from the previous month by the 8th of the current month. This requirement arises from the NSA law, according to which all invoices from the previous month must be formed by the 7th of the current month.
- Educate yourself and your employees. Make sure that you and your employees know and understand how to generate sales invoices, what the taxation of these transactions will be, and what expenses the company may have.
- Be ready to respond to your accountant's request for additional comments on your company's documents if they have questions.
- Pay salaries at least 100 euros above the legal minimum, if your financial situation allows.
- Do not assign yourself as a board member to a senior management position. This increases the salary requirement, as in this case, your salary will be compared to the salaries of the leaders of the largest companies in Estonia.
Tax Inspection Is Not the End of the World!
Even if your company faces a tax inspection, it is important to remain calm and understand that it is a standard procedure. All inquiries and clarifications from the tax authority will be sent to you in writing, allowing you to clearly see all the aspects that raised questions for the inspectors.
Be sure to notify your chief accountant about the start of the inspection. This will allow your financial specialists to promptly prepare the necessary documentation and advise you on all matters. A competent approach to conducting a tax inspection and active interaction with tax authorities through your accounting will help make the process as smooth and trouble-free as possible.
Conclusion
Following these simple principles will help your business avoid unnecessary checks and maintain good relations with tax authorities, ensuring the stability and reliability of your enterprise.