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Impact of submitting the transaction information to the tax authority has proved to be even a more effective measure than initially expected

28 July 2015

During the first half-year of 2015, the businesses have paid 95 million euro more value added tax than last year. The Estonian Tax and Customs Board estimate that the yearly impact of the requirement to submit the transaction information, which was enforced at the end of the previous year, will be at least 70 million euro instead of the initially estimated amount of 30 million euro.

Starting from July this year all the undertakings, who are liable to account for VAT are submitting the information concerning the transactions with the value starting at least from 1000 euro to the Estonian Tax and Customs Board (ETCB). By submitting the Annex to the VAT return the undertakings have helped to subdue the VAT frauds and to enhance the competitive parity. 

Added value of the internal transactions, or increase in the difference between the domestic sale and purchase is also an indication to the improvement of competitiveness of the undertakings who are behaving correctly. “Decrease in the percentage of fictitious invoices facilitates the honest undertakings to sell their production at a better price, as a result of which they can pay more value added tax,” explained Mr. Egon Veermäe, the Deputy DG of the ETCB. “Compared with the same period last year the added value of  transactions performed in Estonia has grown by 8.3 per cent, which has not reached such high level since 2007,” added Mr. Veermäe.

Despite of the fact that the amounts of domestic sale and acquisitions decreased during the first half-year of 2015, respectively by 62 million euro and 426 million euro as compared with the same period last year, at the same time the VAT liability increased by 76 million euro, which clearly indicates that the percentage of fictitious invoices has continually been decreasing.

According to Mr. Veermäe, thanks to the introduction of the system of submitting the transaction information, taxpayers have submitted also fewer claims for refund of VAT. In the first half-year, the number of refund claims was decreased by 930 claims per month on an average and the amount claimed for was by 23.4 million euro less than last year for the same period. “While conducting new tax proceedings we have also observed that the percentage of large-scale tax frauds has decreased, because in the Annex to the VAT return such schemes will immediately be revealed,” said Mr. Veermäe.

By 20 July also the businesses, who applied for extension of the term for submission of the Annex to their VAT returns, had to submit it. Altogether 394 persons were exempted from the obligation to submit the said annex, but almost 100 companies started to declare the transaction data already during the period of exemption. 

Out of all persons liable to account for VAT, 44 per cent of persons, who have submitted the basic VAT returns, have also submitted the Annex to the VAT return. The submitted data cover almost two thirds of the average monthly turnover in Estonia, which is ca 20.3 milliard euro per month. 

July 28, 2015