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Public databases for conducting background research on counterparties

It is always wise to conduct research on business partners prior to entering into business transactions.

We have aggregated the most popular public and private sector databases that enable the background and creditworthiness of counterparties to be researched and evaluated, thereby reducing the business and tax risks. In addition to any information obtained from such databases it is important to rely on your own intuition and experience as an entrepreneur in your selection of a counterparty.

It is generally necessary to know the counterparty's name and commercial register number and/or personal ID number to submit inquiries. Some inquiries provided by databases may not be free of charge but payment for such services may be worth considering mitigating risks in case of new business partners or higher value transactions.

If necessary, it is always possible to ask for special tax information certificates from the counterparty. The data concerning the labour force, wages and salaries, supply and tax arrears of the company can be displayed in the certificate and sent directly through the e-Tax/e-Customs to its counterparty. By using the certificate for tax data, counterparties may enhance their trustworthiness and thus both counterparties will gain confidence that the tax matters of the counterparty are in order.

We also recommend you to read the guidelines titled "Guidelines for avoidance of getting involved in tax fraud schemes" and the Consumer Protection Board guidelines titled "Buy smart“ (in Estonian and Russian).

Internet search engines

By doing internet searches on the counterparty and their legal representatives you can find information from various articles, topics discussed in message boards, results from the credit reporting registries, criminal records and court judgments that have entered into force that may provide you with clues as to whether this counterparty is reliable or not.

Inquiries available from the website of the Estonian Tax and Customs Board

  • Estonian value-added tax identification number (VAT ID) verification
    By using this search tool you can check if a person, for example your business partner, has been registered as a VAT payer in Estonia.
    If a vendor does not have a valid value-added tax identification number, they are not entitled to add value-added tax to an invoice and the buyer is not entitled to deduct input value-added tax.
  • European Union value-added tax identification number (VIES VAT number) verification

    By using this search tool you can check if a person such as your business partner has been registered as a VAT payer in any European Union Member State and if the VAT number is valid.
    It is important to check if the name of the counterparty corresponds to the VAT number. If no valid VAT number exists, the relevant rules must be adhered to regarding taxation of the transaction (for example, intra-Community supply must be taxed at the rate of 20% instead of 0%).

  • Tax arrears verification
    By using this search tool you can check if someone has any tax arrears or not. The existence of tax arrears may indicate solvency problems of the counterparty or issues related to adhering to payment terms, therefore they may not perform the obligations undertaken in the transaction on a timely basis.
  • Taxes paid 

    The Excel spreadsheets that can be opened at the bottom of the page "Taxes paid" allow you to verify if a person such as your counterparty has paid taxes, has declared the total amount of the supply and the number of employees and in what amount. The tables provide the total amounts of state taxes paid in a quarter by taxable persons (except private individuals) and separate amounts of total employment taxes, contributions to mandatory funded pension and unemployment insurance premiums paid.
    For the employment taxes paid, it is possible to calculate the estimated number of employees of the counterparty by using the employment taxes due on the average salary of the relevant industry as a basis. This is useful in a situation where for example labour is required to perform a service and where it is indicated on a quarterly basis that employment taxes are not paid at all or paid in a very low amount and in such cases it can be assumed that the counterparty itself lacks the employees that could render the necessary service.
    It is recommended to pay attention to the number of employees, especially when it is necessary to have the workforce in order to provide service. The information on the sum of the declared turnover and the number of the employees allows to avoid the uncertainty during the choice of the counterparty.
    If the total amount of state taxes paid is zero, one potential reason in addition to the failure to pay taxes is that it is an export-oriented company and the company's purchases for the period exceed its sales or the entity is part of a VAT group where the representative person reports the revenue for the other group entities and pays the value-added tax for them. The taxes paid by customs agencies may also include the taxes due by their customers. Excise duties paid are included in the tax accounting of the entity that declares the goods for consumption. Publicly disclosed taxes are helpful in explaining the contributions of businesses in society and greater levels of disclosure improve fair competition.

Information system of the commercial register

The information system of the e-commercial register accepts inquiries about the current and historical data of legal entities. Information obtained from such inquiries can be used to evaluate the background of counterparties.

Some data may be viewed free of charge: current data of a registry card  (containing the company's commercial register number, business name, address, time of initial entry, legal form, registry entry status, size of share capital), value-added tax identification number and related validity information, information on tax arrears, unfiled tax returns, information on the submission of annual reports and any business prohibitions in effect. A detailed list of charges for fee-based services is available on the website of the e-commercial register.

European Business Register

The European Business Register acts as an intermediary for official information on European companies. Charges apply for the retrieval of data from European Business Register (see a detailed list of charges by country).

Credit data reporting databases

Various credit data reporting databases are available online that provide useful information on counterparties. For example, the website of Krediidiinfo AS provides various reports to evaluate the financial capacity of counterparties, registry card data, value-added tax identification number and related validity information, information on activity licenses, individuals related to companies, information on the tax arrears and delinquencies of companies, information on taxes paid, annual reports, information on registered immovable properties, information on pledges. Charges apply for some of the services provided by Krediidiinfo AS, (see a detailed list of charges for services).

Register of economic activities

The register of economic activities includes industries with special requirements, making it easier to conduct background checks on companies. The register of economic activities provides information on activity licenses, activity notifications, precepts and prohibitions issued to companies. The following industries are exempt from registration with the register of economic activities:

  • in the construction sector construction management, energy audit and issuance of energy performance certificates;
  • in the commercial sector services, management of commerce; in case of retail and wholesale commerce and food service, a notice of economic activities is only submitted in case of sale of alcohol and tobacco. Other food and manufactured products (such as sale of vehicles, clothing and shoes) are no longer subject to registration in the register of economic activities.

  • hospitality services, except in case of sale of alcohol and tobacco, for which a retail or food service notice of economic activities must be submitted;

  • mining sector;
  • performers of technical inspection (audit) for equipment;
  • measuring and testing laboratories;
  • personnel certification.

Criminal Records Database

The Criminal Records Database is a state database containing information on persons with a criminal record (including legal entities) and the penalties imposed. It costs 4 euros to make an inquiry.

If the Criminal Records Database indicates that a person has prior tax-related offences, this may constitute one risk for you to get involved in a tax fraud scheme by entering into transactions with that person. Repeated violations of law may also indicate that a person does not have a high level of compliance with the law and entering into transactions with them may pose a risk.

Providers of government grants and registries

If a counterparty claims that they finance their activities and/or the transaction with grants, the accuracy of such information can be verified from the following public databases:

Register of judicial decisions

The website Riigiteataja.ee allows searches of decisions published by courts and their summaries from the register of judicial decisions.

Decisions of the Supreme Court of Estonia can be found on the website of the Supreme Court.

The Database of Court Decisions enables you to search for court decisions entered into force based on the name of a company or a natural person (by entering the name into the box “Text of a decision“), so that you can assess your counterparty’s law-abidingness. From court decisions you can find out whether a company or a natural person has committed or engaged in any tax offences, and what the nature of the specific offence was.

A person’s past record of infringements may indicate the risk for becoming involved in a tax fraud chain when carrying out transactions with this person. Likewise, repeated violations of law may be a sign of legal compliance issues, and transacting with such a person could entail risks.

 

 

18.04.2017