Essential change concerning tax debts in Estonia

Tax debts can now expire according to Estonian supreme court

The Estonian Supreme Court ruled on 10 October 2018: tax debts expire after five years, the same way as other debts. More precisely: the expiration ends with handing over the claim to the bailiff and starts again on 1st of January of the following year. If the debt has not been settled within 5 years after that date, it has expired.

Until now, the state’s tax claims were essentially timeless – if the tax authorities had handed them over to the bailiff, they did not expire. Even the debtor’s death did not stop claims, so that the obligation passed to the debtor’s successors. At the same time, other claims, e.g. alimony and claims arising from health damage, are treated differently in that they expire after a certain period.
The Supreme Court acknowledged that there is no reason to treat tax debtors differently. In accordance with the principle of legal certainty, the state must ensure that legal stability in all legal relations arises after a reasonable period of time.

The decision is expected to make the state’s efforts to recover tax debts more effective. According to the Estonian Taxpayers’ Association the decision does not motivate anyone to avoid taxes.

The Supreme Court’s decision retroactively concerns all valid tax claims handed over to the bailiff before 1 January 2013. According to the Estonian Tax Board there are altogether ca. 2,500 such claims, of which 10% are against businesses. The claims amount altogether to 9.5 million euros, the recovery of which is considered to be unlikely.

Source: Supreme Court ruling of 10.10.2018; Estonian Tax and Customs Board

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