An important change for all businesses operating in Estonia will take place this summer, namely a nationwide Estonian employment register with the Estonian Tax and Customs Board will start operating from July 1st 2014. The new register will contain data on all persons working in Estonia. The purpose of the register is to reduce the possibility of paying unreported wages.
So far businesses operating in Estonia submitted data to the Estonian Health Insurance Fund, which concentrated the data of all insured workers for whom the employer paid social tax. From July 1st the Health Insurance Fund’s register will be closed and the workers’ data will be located in the new workers’ register, which can be accessed through the e-Tax Board/e-Customs on the Estonian Tax and Customs Board’s website.
The most important change for the business owner is that now short-term contracts for services and authorisation agreements will also need to be registered, which was not done before. Voluntary pro bono work in a company also needs to be registered. If a company uses freelance persons working under an authorisation agreement, then from July 1st such an employment relationship needs to be registered. From the 1st of July a company must enter all of its employees on the new register regardless of their contract type. This requirement does not apply to members of the board who do not need to be registered in the absence of an employment relationship.
On the new register the employer needs to enter the employee’s name, an Estonian personal identification code where existing (where working for less than five days the date of birth is sufficient) and the time of the work taking place. This has to be done through the Estonian Tax and Customs Board’s portal. On hiring a foreigner the address of the place of work and the job title also need to be noted down. The registration must be completed by the time the employee actually commences work.
It is important to understand that the new worker registration procedure is mandatory. For disregard a compensation levy may be imposed on a company, which in the first instance may amount to 1300 Euros. For example if the tax authority visits a company where 5 employees are registered but there are 8 people doing work present, then the company may already be punished for not registering voluntary work.
The commencement of work on the basis of an employment contract and voluntariness is the actual date of commencing work, for a contract under the law of obligations (authorisation agreement) the date of the contract coming into force. For contracts under the law of obligations in force before the workers’ register becoming mandatory the date of commencement of work is July 1st 2014.
To consult the accountants at 1Office Estonia and for expert help with registering employees call +372 6 311 118 or write contact@1office.ee.
Additional information on the changes can be found on the Tax and Customs Board website.
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