The Tax and Customs Board has published on its website an explanation (only in Estonian language: https://www.emta.ee/et/ariklient/tulu-kulu-kaive-kasum/muudatused/maksudeklaratsiooni-andmete-parandamisele-laieneb) to the decision of the Estonian Supreme Court 3-18-989 from 12 May 2020, that the equity contributions made to the share capital of the company in 2011–2012 should have been declared in the appendix 7 of tax form TSD for January 2015. If this deadline was not met, then the company should have been adjusted the referred tax declaration within three years, i.e. by 12 February 2018.
In addition, the decision of the Supreme Court underlined the principle that the corporate tax liability arises when the payments made from the equity of the company exceed the paid in equity. This applies regardless whether the company has declared its equity contributions by above deadlines or not. Undeclared equity contributions cause to the taxpayer higher burden of proof during the tax control procedure and the obligation to submit additional documents, in order to prove contributions paid to the equity of the company.
According to the explanation of the Tax and Customs Board, any undeclared equity contributions do not mean in itself that any payments made from the equity of the company would result with the corporate tax liability. After passing the deadlines of submitting the tax declaration and the three-year period of adjustment, the tax authorities have the right to take into account any proven equity contributions during the tax control procedure and to the extent of these to reduce the corporate tax liability of the company. In the opinion of the tax authorities, this can be an exceptional case, when the company:
• notifies the tax authorities about these undeclared equity contributions, which were not declared in time,
• submits respective documented proof and
• the tax authorities have the right to reduce the corporate tax liability to the extent of equity contributions, which were found proven during the tax control procedure.
The company which would like to take into account any undeclared equity contributions upon making the payments from its equity, should therefore be prepared for additional tax control procedure and should in declaration of these payments follow instructions to be issued by the Tax and Customs Board.